WRAPUP 2-India telcos raise 3G funds, cbank assures on liquidity

Wed May 26, 2010 10:02pm IST

Stocks

   

* Idea, Tata Teleservices raise $1.7 bln to fund India 3G

* C.bank announces measures to ease liquidity pressure

* Domestic financing push sends rates higher

* India's C.bank, country's top lender assure on liquidity

* May 31 deadline looms for $14.3 bln in spectrum payments

(Adds c.bank measures on liquidity in paragraph 3-5)

By Devidutta Tripathy and Swati Bhat

MUMBAI, May 26 (Reuters) - Indian mobile carriers scrambled to secure funds to pay for 3G licences and the central bank moved to calm fears of a cash crunch after an auction of high-speed mobile spectrum raised $14.3 billion, nearly double the government's target.

Short-term Indian interest rates have risen this week ahead of a May 31 deadline for carriers to pay for spectrum they won in the auction that ended last week after 34 days of bidding.

After market hours on Wednesday India's central bank announced measures to ease liquidity tightness.

The Reserve Bank of India (RBI) raised the limit on bank borrowing under its repo facility by 0.5 percent of their deposits to meet liquidity requirements due to heavy fund outflows due in coming weeks. It also said it will conduct a second repo auction every day until July 2.

These ad-hoc measures have been taken to address the temporary liquidity tightness that may arise on account of advance tax payments and outflow towards auction payment for 3G spectrum and will be effective from Friday, RBI said.

No. 6 carrier Idea Cellular (IDEA.BO) said on Wednesday it raised about 35 billion rupees ($740 million) from domestic banks and financial institutions.

No. 5 carrier Tata Teleservices [TATASL.UL], 26 percent owned by Japan's NTT DoCoMo (9437.T), had raised about 46 billion rupees ($973 million) from domestic market sources, a person with knowledge of the matter said.

State Bank of India (SBI.BO), the country's top lender, said successful bidders in last week's auction have asked it for funding totalling 180 billion rupees.

SBI Chairman O.P. Bhatt told reporters the bidders may only draw half that sum but the bank had surplus cash to meet "all of it".

Reserve Bank of India Deputy Governor K.C. Chakrabarty said the central bank would ensure adequate liquidity in the banking system.

Indian telecommunications companies have raised around $4 billion rupees via short-term debt and syndicated loans, a large chunk of it this week, to help fund their 3G spectrum purchases. [ID:nSGE64K0FR] [ID:nSGE64O0CC] [ID:nSGE64P0HL] [ID:nSGE64P0GY]

SPIRITED BIDDING

While the spirited bidding was welcomed by a deficit-strapped government, it has fuelled investor worries that mobile carriers already locked in a margin-crushing price war and facing billions of dollars in network construction costs were overpaying.

Top carrier Bharti Airtel (BRTI.BO), which a source this week said had raised 85 billion rupees through an onshore six-year syndicated loan facility to fund 3G spectrum, complained that the high cost of bidding had thwarted its ambitions of securing a pan-Indian 3G footprint.

A separate auction for wireless broadband spectrum started this week, with bids for one set of nationwide licences reaching $676 million on the second day of auction, which means companies will have to raise more money.

Morgan Stanley estimates New Delhi will raise a combined 921 billion rupees from the rights to 3G and broadband airwaves.

SHORT-TERM RATES RISE

The fixing for the yield on the three-month Reuters Certificate of Deposit (CD) benchmark <0#INCDBMK=> rose to 5.50 percent on Wednesday, its highest in more than two months, and bankers said it was likely to rise further.

The liquidity jitters were worsened when State Bank of India, a rare issuer of short-term debt, on Wednesday raised about 10 billion rupees via CDs.

Although an SBI source said the money was raised to meet a mismatch at a subsidiary, the timing bolstered a view in the market that the bank was concerned liquidity could be tight in coming days.

Bhatt said there was adequate liquidity in the Indian banking system and that liquidity was unlikely to move into deficit due to the 3G payments.

But he added that the bank is seeing a 25-50 basis points upward revision in sub-BPLR (benchmark prime lending rate) loan rates due to the rise in short-term rates. (Additional reporting by Suvashree Dey Choudhury; Writing by Tony Munroe and Jeanette Rodrigues; Editing by Surojit Gupta and Mike Nesbit) ($1=47.3 rupees)

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