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July 20, 2012, 3:34 a.m.
The Telecom Regulatory Authority of India (TRAI) recommended spectrum mortgage and the Reserve Bank of India (RBI) has sanctioned it.
The impact considered thus far has been limited to mobile carriers’ ability to raise capital. After the 2G spectrum scam, financial institutions have ceased supplying funds to telcos; meanwhile, the proposed reserve price per megahertz of pan-India spectrum in the upcoming auction is 10 times higher than what was paid in 2008. By allowing spectrum to be treated as a tangible asset, RBI permits operators to tap the valuable resource as collateral to secure credit.
However, there are other policy considerations, including the potential implications on productive efficiency, government receipts, competition and cellular penetration. These unexamined issues are explored in our recently published ABI Insight .