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State Bank of India has mooted the idea of setting up a spectrum exchange where operators will be able to trade radio frequencies.
SBI has said that the exchange can also be utilised by the Government for release of additional spectrum as is the case in offers of sale for equity shares.
In a communication to the telecom regulator, SBI said, “The Government should consider permitting trading of spectrum that has been granted by way of auction at a market determined price (i.e. liberalised spectrum) on a common trading platform. The trading can be by way of outright sale as well as on a short/long-term lease basis and standardised products may be created in this regard. This shall ensure that unutilised spectrum with various players shall be better used by operators who are facing a shortage of the same.”
SBI has said that the exchange can also be utilised by the Government for release of additional spectrum as is the case in offers of sale for equity shares.
In a communication to the telecom regulator, SBI said, “The Government should consider permitting trading of spectrum that has been granted by way of auction at a market determined price (i.e. liberalised spectrum) on a common trading platform. The trading can be by way of outright sale as well as on a short/long-term lease basis and standardised products may be created in this regard. This shall ensure that unutilised spectrum with various players shall be better used by operators who are facing a shortage of the same.”
Efficient utilisation
SBI said that this shall not only ensure efficient utilisation but also provide liquidity for the resource with players not having to wait for auctions which take place only periodically. Better liquidity will in turn provide the authorities more relevant and accurate benchmarks for setting reserve prices for future spectrum auctions.
“Further, steady availability of spectrum through exchange shall encourage competition and ensure that niche players requiring smaller quantities of spectrum are also able to compete in the market,” the bank said in its response to TRAI’s consultation paper on spectrum pricing and allocation.
“Further, steady availability of spectrum through exchange shall encourage competition and ensure that niche players requiring smaller quantities of spectrum are also able to compete in the market,” the bank said in its response to TRAI’s consultation paper on spectrum pricing and allocation.
A tangible asset
SBI has also pushed for making spectrum a tangible asset that can be mortgaged by the operators while taking loan. Spectrum is considered as an intangible asset in the books of the licensees and for security cover calculations as per RBI instructions.
“Since spectrum is classified as intangible asset, when banks provide funds for roll-out of business plan or for meeting entry fee/ BG requirement, the loans to that extent have to be treated as unsecured loans, even though the licenses are assigned in favour of the lenders. Holding unsecured assets on the banks books have in turn several implications in terms of lower ratings, higher provisioning, etc,” SBI said. The bank said that TRAI may initiate a consultation process with RBI for treating the spectrum as a tangible asset that can be mortgaged for the purpose of lending by banks. In case of default by the operators, lenders can recover their dues by selling the spectrum on the trading exchange.
“The valuation of spectrum can be expected to increase if the spectrum is made mortgageable. The spectrum holders on the other hand shall need to mark the value of spectrum to the market value as is happening in case of its other assets,” it said.
This is not the first time SBI has written to TRAI expressing its concerns on the way spectrum was being priced and allocated. SBI Capital Markets Ltd has earlier written to the regulator with a six-point action plan to the regulator, including allowing the operators to mortgage spectrum as collateral for the loan.
SBI Capital has also suggested that it should be allowed to take over the assets and infrastructure of the 2G operators whose licences have been cancelled by the Supreme Court. The apex court in February asked the Government to cancel 122 licences given in 2008. Those affected include Etisalat DB, Uninor, Sistema Shyam, Videocon, STel and Loop.
This has made the banking sector nervous as most of these companies had taken huge loans for investing in the business. SBI , for instance, had a total exposure of Rs 23,000 crore in the telecom segment, of which, Rs 15,000 crore is direct funding and the balance is non-fund based (guarantees, and so on).
thomas.thomas@thehindu.co.in
Source: thehindubusinessline
“Since spectrum is classified as intangible asset, when banks provide funds for roll-out of business plan or for meeting entry fee/ BG requirement, the loans to that extent have to be treated as unsecured loans, even though the licenses are assigned in favour of the lenders. Holding unsecured assets on the banks books have in turn several implications in terms of lower ratings, higher provisioning, etc,” SBI said. The bank said that TRAI may initiate a consultation process with RBI for treating the spectrum as a tangible asset that can be mortgaged for the purpose of lending by banks. In case of default by the operators, lenders can recover their dues by selling the spectrum on the trading exchange.
“The valuation of spectrum can be expected to increase if the spectrum is made mortgageable. The spectrum holders on the other hand shall need to mark the value of spectrum to the market value as is happening in case of its other assets,” it said.
This is not the first time SBI has written to TRAI expressing its concerns on the way spectrum was being priced and allocated. SBI Capital Markets Ltd has earlier written to the regulator with a six-point action plan to the regulator, including allowing the operators to mortgage spectrum as collateral for the loan.
SBI Capital has also suggested that it should be allowed to take over the assets and infrastructure of the 2G operators whose licences have been cancelled by the Supreme Court. The apex court in February asked the Government to cancel 122 licences given in 2008. Those affected include Etisalat DB, Uninor, Sistema Shyam, Videocon, STel and Loop.
This has made the banking sector nervous as most of these companies had taken huge loans for investing in the business. SBI , for instance, had a total exposure of Rs 23,000 crore in the telecom segment, of which, Rs 15,000 crore is direct funding and the balance is non-fund based (guarantees, and so on).
thomas.thomas@thehindu.co.in
Source: thehindubusinessline
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