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Spectrum ‘mortgaging’ approved by Indian central bank

Mobile operators in India will soon be able to use spectrum as collateral in order to attract investment from banks. A proposal which would allow operators to ‘mortgage’ their spectrum has been approved by the country’s central bank.

The proposal by regulator TRAI has gained the support of the Reserve Bank of India (RBI), meaning that it could be implemented by the end of August, in time for the start of the 2G spectrum auctions. Considering the unexpectedly steep reserve prices proposed by TRAI, the ability to mortgage spectrum could provide operators with an avenue for raising enough capital to bid.

The RBI has informed the Indian finance ministry that banks will have the right to seize airwaves as assets if the licences are defaulted or annulled – in the event that this happens, they will then be able to “sell, transfer, assign, exchange and dispose of the airwaves without any restraining conditions”, according to the RBI.

For operators, this looming possibility will largely be offset by having a strong avenue for fundraising.  Research from the Cellular Operator Association of India (COAI) last month suggested that the current INR1857 billion (US$33.7 billion) debt burden for Indian operators could increase by 150% to INR4577 billion.

According to TRAI, the reserve prices are “in line with international prices". A nationwide 1800MHz licence has a starting price of INR36.22 billion (US$689.6 million) – more than ten times the starting bid for the same spectrum during the 2008 auctions.

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