Telecom firms start raising funds; RBI says it will ensure liquidity

Telecom firms start raising funds; RBI says it will ensure liquidity

New Delhi/Mumbai: Indian cellular operators scrambled to secure funds to pay for 3G licences and the central bank sought to assuage fears of a liquidity crunch after an auction of high-speed mobile spectrum raised $14.3 billion (Rs68,068 crore), nearly double the government’s target.

Short-term interest rates have risen this week ahead of a 31 May deadline for telecom operators to pay for spectrum they won in the auction that ended last week after 34 days of bidding.

Idea Cellular Ltd, India’s No.6 telecom operator, said on Wednesday it raised around Rs3,500 crore from domestic banks and financial institutions.

Tata Teleservices Ltd, 26% owned by Japan’s NTT DoCoMo Inc., had raised around Rs4,600 crore from domestic market sources, a person with knowledge of the matter said.

State Bank of India (SBI) said successful bidders in last week’s auction have asked it for funds totalling Rs18,000 crore. SBI chairman O.P. Bhatt told reporters the bidders may only draw half that sum but the bank had surplus cash to meet “all of it".

Reserve Bank of India deputy governor K.C. Chakrabarty said the central bank would ensure adequate liquidity in the banking system.

Indian telecommunications companies have raised around $4 billion through short-term debt and syndicated loans, a large chunk of it this week, to help fund their 3G spectrum purchases.

While the spirited bidding was welcomed by a deficit-strapped government, it has fuelled investor worries that mobile operators already locked in a margin-crushing price war and facing billions of dollars in network construction costs were overpaying.

Bharti Airtel Ltd, which a source this week said had raised Rs8,500 crore through an onshore six-year syndicated loan facility to fund 3G spectrum, complained that the high cost of bidding had thwarted its ambitions of securing a pan-Indian 3G footprint. A separate auction for wireless broadband spectrum started this week, with bids for one set of nationwide licences reaching $676 million on the second day of auction, which means companies will have to raise more money.

Morgan Stanley estimates India will raise a combined Rs92,100 crore from the rights to 3G and broadband airwaves.

The fixing for the yield on the three-month Reuters Certificate of Deposit (CD) benchmark rose to 5.50% on Wednesday, its highest in more than two months, and bankers said it was likely to rise further.

The liquidity jitters were worsened when SBI, a rare issuer of short-term debt, on Wednesday raised about Rs1,000 crore through CDs.

Though an SBI source said the money was raised to meet a mismatch at a subsidiary, the timing bolstered a view in the market that the bank was concerned liquidity could be tight in coming days.

Bhatt said there was adequate liquidity in the Indian banking system and that liquidity was unlikely to move into deficit due to the 3G payments.

But he added that the bank is seeing a 25-50 basis points upward revision in sub-BPLR (benchmark prime lending rate) loan rates due to the rise in short-term rates.