Calcutta, July 5: Telecom players are refinancing their high-cost domestic loans that were used to win expensive 3G licences with cheaper loans from abroad.
Six telecom firms — Tata Teleservices, Tata Teleservices (Maharashtra), Aircel, Idea Cellular, Reliance Communication and Infotel Broadband — have raised $3.705 billion (approximately Rs 16,500 crore) through external commercial borrowing between September 2010 and May.
Last year, seven telecom companies (excluding state-owned BSNL and MTNL, which already had 3G spectrum prior to the 3G auction last year) had paid nearly Rs 68,000 crore to obtain 3G licences, including spectrum.
These companies had sourced Rs 36,000 crore of a total payment of Rs 68,000 crore as short-term loans such as the sale of commercial papers and bridge loans from banks.
"Most of these debts were short-term borrowings in the form of bridge loans with a maturity of one and one-and-a half years," said Sangeeta Tripathi, a telecom sector analyst at Sharekhan.
"Telecom companies would have to refinance these bridge loans anyway. The process has just started," she said.
According to Tripathi, for companies yet to roll out 3G services, the bridge loans and the interest liability thereon are now capitalised to the balance sheet of individual companies.
"Once they start rolling out 3G services, the loan and the interest liability will be accounted for in the profit and loss account," she said.
"The refinancing of high-cost domestic loans with cheaper external commercial borrowings is thus only sentimentally positive and its actual impact on profit and loss of individual telecom companies can be ascertained once they roll out 3G services and charge the interest liability in the profit and loss account," Tripathi said.
Reliance Communication has so far raised $1.585 billion (approximately Rs 7,053 crore) in January and March this year — the highest among the six companies that have tapped external commercial borrowings — followed by Infotel Broadband ($1 billion) and Tata Teleservices ($750 million), including Tata Teleservices (Maharashtra).
Reserve Bank data shows that telecom companies have taken these overseas loans for longer terms of between five years and 10 years.
"Even after providing for foreign exchange hedging, the maximum cost for such overseas loans would be 10 per cent or less at present. As against this, the domestic loans would not come at anything less than 12 to 14 per cent. Thus, telecom companies would be able to save a lot in interest outgo," said Sudeep Bandyopadhyay, managing director and CEO, Destimoney Securities.
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