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EGoM on Telecom Approves Proposal to Allow Telecom Firms to Mortgage Spectrum

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July 16, 2012

EGoM on Telecom Approves Proposal to Allow Telecom Firms to Mortgage Spectrum

By Sujata Garud
TMCnet Contributor


Now telecom firms will be able to mortgage spectrum to raise funds from banks in order to buy airwaves in India. This proposal was approved "in principle" by the Empowered Group of Ministers (EGoM) on telecom. The EGoM includes Minister of Communications Kapil Sibal, Information and Broadcasting Minister Ambika Soni, Defense Minister A.K. Antony, Law Minister Salman Khurshid and Minister of State in the Prime Minister's Office V. Narayanasamy as members.

Due to the ongoing uncertainties in the telecom sector, banks have been recently unwilling to lend money to telecom companies without a securitized asset as collateral. The meeting also had before it the sector regulator's presentation on impact of pricing on tariff. The Telecom Regulatory Authority of India (TRAI) has recommended that there should not be more than $0.18 per minute increase in the tariffs. Consultants PricewaterhouseCoopers (News - Alert) (PwC) has projected that telecom tariffs will increase by $1.64 per minute in metros and $0.36-$0.62 on an average across the nation if the sector regulator's recommendations on spectrum pricing are accepted.

Kapil Sibal, addressed reporters after the meeting. He said that some important decisions including the roll-out obligation are yet to be finalized. Hence, the EGoM headed by Home Minister P. Chidambaram will be meeting again the next week. He also stressed that the issue of pricing of spectrum will be dealt by the EGoM.

Kapil Sibal said, “It will be the banks that will take care of the auction in close association with the DoT. In other words the architecture of the auction will be discussed with the DoT and the auctioneer shall be decided in consultation with the DoT (Department of Telecom) but ofcourse it will be the banks which will auction the spectrum. There are some issues we will decide, some issues will be decided by the cabinet apart from the reserve price - that is our prerogative.”

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Edited by Rachel Ramsey

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