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Rediff.com  » Business » PFC-like body mooted for telecom financing

PFC-like body mooted for telecom financing

September 14, 2011 12:31 IST

The government has put together a three-pronged approach to meet long-term funding needs of the telecom sector, which has seen tough times since the 2G scam.

The blueprint, expected to be incorporated in the new telecom policy of 2011, includes the setting up of a Telecom Finance Corporation on the lines of the Power Finance Corporation to provide long- and short-term loans.

It will also involve providing infrastructure status to the sector and extending the mandate of  Indian Infrastructure Finance Ltd to include telecom.

According to Department of Telecom and Planning Commission estimates, the sector will require Rs 650,000 crore (Rs 6,500 billion) investment, the bulk of it from the private sector.

According to the Planning Commission, the private sector will have to contribute Rs 541,795 crore (Rs 5417.95 billion) during the 12th plan, and the rest would come from state owned undertakings and the central government.

Telecom operators, especially new players, have been facing severe challenges in arranging funds from banks and financial institutions.

New companies had to fork out huge amounts to roll out networks but were engaged in cut-throat rate battles that hurt bottom lines. The new operators put in Rs 20,000 crore (Rs 200 billion) but were not able to generate commensurate revenues.

3G operators, put in Rs 50,000 crore (Rs 500 billion), which included loans through a liberal external commercial borrowing policy, to fund their purchase of spectrum and rollout. With the government looking at further auctioning of 3G as well as 4G spectrum some time next year, operators will have to be ready with more money to keep going.

The new telecom policy-2011 is also expected to come out with new norms for mergers and acquisitions, enhancing rural coverage, and spectrum allocation, among other things.

Mansi Taneja, Surajeet Das Gupta in New Delhi
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