Companies & Sectors
Telcos allowed to raise ECBs to pay for 2G spectrum

The telecom industry had been seeking further easing of the ECB norms as banks are reluctant to lend money to the sector

 
New Delhi: The Indian government on Friday said telecom companies that win in the upcoming 2G spectrum auction will be allowed to raise cheap loans from overseas markets in the form the external commercial borrowings (ECBs), reports PTI.
 
"The successful bidders in the 2G auction would be eligible to refinance their Rupee loans availed of from the domestic lenders for making the upfront payment with a long term ECB under the automatic route," a Finance Ministry official told PTI.
 
The bidding for the airwaves is scheduled to start from 12th November.
 
The telecom industry had been seeking further easing of the ECB norms as banks are reluctant to lend money to the sector.
 
In order to develop the telecom sector, the government in January 2010 had provided a window of 12 months to successful bidders of 2G auction for refinancing the rupee loan from domestic lenders to make payment for spectrum allocation with a long term ECB under the approval route.
 
"Keeping in view the large outlay of funds required to be paid directly to the government within a limited period of time, relaxation is provided for the upcoming 2G auction," the official added. .
 
The Finance Ministry official said bidders can also avail of short-term currency loans in the nature of bridge-finance under the automatic route for making upfront payment towards 2G spectrum allocation and replace it with long-term ECB under the automatic route, subject to certain terms and conditions.
 
Next week, the government is auctioning spectrum at a minimum bid price of Rs14,000 crore for 5 MHz of airwaves for all the 22 telecom zones.
 
The auction-based price is more than seven times that the carriers paid in earlier sales where airwaves were bundled with telecom permits.
 
Airtel and Vodafone are among the telecom biggies that have applied to bid in the auction, but Reliance Industries and Russia's Sistema surprised by staying away.
 
Airtel and main rival Vodafone have only bid for additional spectrum in select few circles. Other players in the fray are Videocon, Telenor and Idea.
 
The Reserve Bank, the official said, would soon be issuing the detailed guidelines for relaxing the ECB norms.
 

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Mallya agrees on 51% stake sale in United Spirits to Diageo

The deal could entail Diageo picking up to 51% stake in United Spirits for between $1 billion and $2 billion

 
New Delhi: Vijay-Mallya led United Breweries (UB) Group is understood to have reached a deal with world's largest spirit maker Diageo for a stake sale in United Spirits, reports PTI.
 
According to sources, the deal will be announced on Friday.
 
However, the exact details such as the quantum of stake and valuation could not be ascertained.
 
When contacted, an UB Group spokesperson declined to comment.
 
According to different reports, the deal could entail Diageo picking up to 51% stake in USL which could be valued between $1 billion and $2 billion.
 
In September this year, United Spirits had confirmed that it was in talks with UK-based Diageo Plc for a stake sale.
 
"United Spirits and Diageo Plc confirm that the UK-based company is in discussion with it and United Breweries Holdings in respect of possible transactions to acquire an interest in the liquor firm," United Spirits had said in a filing to BSE.
 
USL is the world's second largest spirits maker after Diageo and markets various liquor brands including Signature, Bagpiper, Antiquity, Royal Challenge, Signature in the country.
 
USL's sales volumes stood at 3.13 crore cases for the first quarter ended June 30.
 
Mallya-led United Breweries Holdings Ltd (UBHL), the promoter of USL, holds 18.03% stake as on 30th September.
 
Bogged down by the troubles of group firm Kingfisher Airlines (KFA), Mallya has been forced to seek ways to raise funds as lenders to the carrier have refused to sanction further loans.
 
State Bank of India (SBI), the largest lender to the airlines, wants the airline's promoters to bring in a minimum of $1 billion (about Rs5,400 crore) from any source by month-end for its revival.
 
Already the country's aviation regulator has suspended operating permit last month.
 
UBHL has said the company along with its subsidiaries has significant financial exposure on various counts to KFA, which has ceased to be a subsidiary with effect from 18 February 2012 and is now an associate company.
 
This exposure as on 31 March 2012 included equity investment of Rs2,114.28 crore, loans and advances Rs1,048.7 crore and other receivables Rs209.08 crore, and corporate guarantees to banks/aircraft lessors Rs8,925.86 crore.
 

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Additional spectrum allotted during Mahajan's tenure without coordination

A letter sent by George Fernandes was purportedly received by Mahajan's office after 15 days and by that time additional spectrum had already been allocated to Bharti Cellular and Sterling Cellular (now Vodafone) in Delhi and Hutch in Mumbai

 
New Delhi: Additional spectrum beyond 6.2 Mhz was allotted during the late Indian Telecom Minister Pramod Mahajan's tenure to cellular operators Airtel, Vodafone and Idea without due coordination with Defence agencies, the Central Bureau of Investigation (CBI) has claimed in a probe, reports PTI.
 
In its report to the Law Ministry, CBI also claimed that Mahajan, who was the Telecom Minister during the Bharatiya Janata Party-led National Democratic Alliance rule, had apparently told "half truth" to Defence Minister George Fernandes that additional spectrum upto 8 Mhz to cellular operators was assigned only after due coordination with Joint Communication and Electronic Staff (JCES).
 
The report which was sent to Law Ministry seeking opinion of the Attorney General whether a criminal case was made out against the accused companies, mentions exchange of communication between the then Ministers Mahajan and Fernandes over the issue of grant of additional spectrum and coordination with Defence Services.
 
In a letter to Mahajan on 4 July 2002, Fernandes had flagged the issue of co-ordination of frequency spectrum with the Defence Services, CBI sources said Thursday.
 
They said the letter was purportedly received by Mahajan's office after 15 days and by that time additional spectrum had already been allocated to Bharti Cellular and Sterling Cellular (now Vodafone) in Delhi and Hutch in Mumbai.
 
CBI sources said Fernandes had written that Telecom Ministry had gone ahead by receiving spectrum fees/charges from the new cellular operators without proper coordination on a case-to-case and place to place at many locations.
 
Mahajan in his reply to Fernandes said frequencies had been assigned only after coordination with the defence services.
 
"The facts, however, show that it was half truth. The DoT actually wrote to JCES that it was going to allocate spectrum on trial basis in a few days and if no response was received from JCES that spectrum would be allocated to respective companies," CBI claimed in its report.
 
CBI claimed that investigation had revealed that the additional spectrum beyond 6.2 Mhz was allotted to the companies even without due coordination by the JCES. 
 
CBI had sent the report to Law Ministry seeking advice of the Attorney General in the case of alleged irregularities in awarding extra spectrum to Airtel and Vodafone after difference in opinion over whether a case against the telecom giants was made out or not.
 
A group of officials believed a case against the two telecom companies was made out as they were only beneficiaries of the laid down policy while another team of officials involved in decision-making had a different view, official sources said.
 
The matter, therefore, was referred to the Attorney General for his opinion who is yet to give any opinion, the sources said, adding CBI would file a charge sheet in the case only after getting the opinion of the top law officer of the government.
 
The agency, in its FIR, had alleged the two companies had entered into a criminal conspiracy which resulted in a loss of over Rs 500 crore to the state exchequer.
 
In its report, CBI alleged that the then Wireless Advisor PK Garg opined on the file that trials would commence under intimation to the Defence Ministry and if no comments were received from them within a month, formal assignment of spectrum would be issued to operators.
 
The opinion of Garg had the concurrence of the then Member (technical) Vinod Vaish, Secretary and also the approval of Mahajan, the agency said.
 

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