Mobile carriers cleared to borrow from abroad

Air India air hostesses sit outside the domestic airport in New Delhi May 25, 2010.

MUMBAI/NEW DELHI (Reuters) - Indian mobile telecoms carriers can raise loans from abroad to refinance local debt, the government said on Friday, helping them to join the bidding process for airwave spectrum.

India is due to start an auction of second-generation (2G) mobile phone airwaves on Monday through an auction after a court ruled that a sale in 2008 was flawed and should be cancelled.

The base price for the forthcoming auction has been set at more than seven times what carriers paid four years ago, raising concerns among executives about how their companies can pay for the airwaves.

Bidders in the 2G auction can now tap short-term foreign currency loans to pay for spectrum bought in the sale and later replace them with longer-term external commercial borrowing.

The government will also remove some of the restrictions that prevent these telecoms businesses from raising loans from their parent companies, a circular from the finance ministry said.

India closely controls how companies can raise money abroad through commercial borrowing, with a complex set of regulations across industries.

The ceiling for external commercial borrowings is currently $750 million per company.

Telecoms executives have called on the government to allow them to tap funds from abroad, given that banks have been reluctant to lend to the sector.

(Reporting by Archana Narayanan and Manoj Kumar; Editing by David Goodman)