Will Banks Accept Telcos Demand For More Funding?

Indian lenders are meeting in the week starting November 4 to take a call on fresh funding that telecom companies have sought to pay the government their dues in accordance with a Supreme Court order. According to the court order on October 24, the telecom companies have three months to pay spectrum usage charges and licence fees in the way adjusted gross revenue has been calculated by the government.

“The banks are meeting on November 7 to take into account the high debt of the telecom companies and discuss the additional line of credit they have sought,” said a source close to the development.

Following the court order, the telecom companies will have to pay Rs 1.33 trillion, which includes interest and penalties.

The bankers are also looking for directions from the committee of secretaries (CoS) set up by the government to look into the issues related to the telecom industry.

At the end of March this year, the wireless telephony operators had together accumulated losses of Rs 1.4 trillion and outstanding debts of around Rs 4.9 trillion, making lenders worry about debt repayment.

Several companies have either shut down or have been referred to the National Company Law Tribunal for debt resolution under the insolvency law. This has made debt repayment difficult for these companies. Bankers say it is unlikely that they can meet the telcos’ demand for additional funding.

“This demand is not for any business purpose but to comply with the court order. How this fresh funding is going to be serviced is a moot point because the balance sheets of telecom companies are stressed,” said a banker.

Illustration: Ajay Mohanty

Another issue is how the telcos that have exited the sector are to account for such payments though that is a separate issue to be discussed, the banker said.

Another aspect playing in the backdrop is that under the inter-creditor agreement framework, offshore lenders are not part of it. Lenders having offshore exposure to telcos are worried that if matters get out of hand, they might land in the soup.

The rating downgrades of two listed players, Bharti Airtel and Vodafone Idea, will also be taken into consideration while taking a final decision.

According to an affidavit submitted by the Department of Telecommunications (DoT) with the court in July this year, Bharti Airtel has pending licence fee dues of nearly Rs 21,700 crore. The dues of the combined entity of Vodafone Idea amount to nearly Rs 28,300 crore. Its loans are not guaranteed by the Aditya Birla Group or Vodafone Plc, the promoters of the company. Reliance Communications, which is undergoing insolvency proceedings, has pending licence dues of nearly Rs 16,500 crore. Tata Group company Tata Teleservices, which has shut down operations, has taken a fresh hit of Rs 9,987 crore and will have to again seek financial help from its holding company, Tata Sons, to pay the DoT.―Business Standard