Telecom top overseas borrower

16 Mar, 2009, 1508 hrs IST,TNN

The money-guzzling telecom sector is the highest borrower from overseas as rapid expansion in India, the world’s fastest growing market, requires constant infusion of funds. Telecom led the list of overseas borrowers in the infrastructure sector in 11 quarters beginning 2006. The cumulative external commercial borrowings (ECBs) of telecom firms between January 2006 and September 2008 stood at a whopping Rs 32,913 crore, according to data released by the Reserve Bank of India (RBI). The telecom sector was followed by the power sector, which took overseas loans of Rs 23,368 crore, during the period.According to the CFO of a top telecom firm, the main reason for heavy overseas borrowings is that it is difficult to get rupee borrowing on a fixed rate basis for a long term of more than three years. “Also, when these ECBs were drawn, they were fully swapped and were equivalent to rupee borrowings at a fixed rate. So on a fully swapped basis, they were more attractive than direct rupee borrowings,” he told ET.

Anil Dhirubhai Ambani (ADA) group’s Reliance Communications (RCOM) is the biggest borrower in the sector. The telco had ECBs of Rs 4,505 crore in 2006, Rs 12,987 crore in 2007 and Rs 4,323 crore up to September 2008. In all, it borrowed Rs 21,815 crore during the period. RCOM was followed by Tata Teleservices, which had overseas loans of Rs 1,925 crore in 2007. Idea Cellular’s ECBs stood at Rs 770 crore in 2007 and Rs 957 crore in 2008, Vodafone Essar Rs 944 crore in 2007 while Bharti Airtel’s ECBs were Rs 916 crore in 2006. Bharti Airtel has not raised any money from abroad in the last two years. Borrowers in the infrastructure sector are allowed to avail ECB of up to $500 million per fiscal under the automatic route beginning October 22, 2008. Now, payment for 3G spectrum is also considered eligible end use for the purpose of ECBs. According to Angel Broking analyst (IT and Telecom) Harit Shah, telecom firms are expanding to newer towns and rural areas and are in need of billions of dollars on a regular basis. “With money being reasonably cheaper abroad and with firms being in a strong position to raise cheaper debt abroad as opposed to from within the country, it is natural to expect them to do so,” he said. Other companies in the telecom sector which took overseas loans include GTL Infrastructure, Spice Communications, Spanco Telesystems and Solutions, Cable & Wireless India, XL Telecom and Shyam Telelink.