The State Bank of India (SBI) will reportedly lend up to Rs100bn (US$1.6bn) to six of the companies that won frequencies in the country’s recent spectrum auction.
The auction closed last week after 10 days of bidding and will allow the government to…
The State Bank of India (SBI) will reportedly lend up to Rs100bn (US$1.6bn) to six of the companies that won frequencies in the country’s recent spectrum auction.
The auction closed last week after 10 days of bidding and will allow the government to raise around US$10bn. A total of eight mobile operators took part but only seven were awarded spectrum after Tata Teleservices missed out.
The state-owned lender will however limit its exposure by taking assets as security, rather than accepting licences as collateral for any money borrowed, the Economic Times reported citing officials with the bank.
SBI was not immediately available for comment.
According to the newspaper, the bank is keen to avoid similar risks as in 2012 when several companies lost their licences in the wake of the country’s 2G scam.
Bharti Airtel, Vodafone, Idea Cellular and newcomer Reliance Jio emerged as the top bidders in this latest auction, which allowed them to not only renew expiring 900 MHz licences but also secure additional frequencies in the 1,800 MHz band for the rollout of LTE services.
However, that spectrum came at a price with Bharti and Vodafone spending around US$3bn each. An India-based lawyer expressed concerns at potentially inflated prices and wondered whether it may add pressure to certain companies’ cashflows. In turn, these operators may look to raise their prices further, he said.
While minimising the financial burden, Nomura analyst Sachin Gupta said in a note that “near-term cashflows will take more of a hit, especially for Idea which has more immediate [licence] renewals”.
Most industry experts agree that this auction confirmed the five or six leading players in India’s crowded mobile sector, which could snap up smaller rivals in the future. Bharti’s agreement to buy Loop Mobile today may be a first step towards consolidation although one analyst argued that M&A deals will remain opportunistic.
