The Department of Telecom’s (DoT) legal officers have cautioned it against backing a proposal by Aircel Cellular Ltd to take a $25-million loan from the State Bank of India.

Aircel Cellular, which operates mobile services in Chennai, had approached the DoT for a tripartite agreement with the bank.

Having a tripartite agreement is a common practice in the telecom sector, which gives the lender confidence that the company seeking a loan is in the clear as far as licensing rules are concerned.

Aircel, majority owned by Malaysian telecom company Maxis Communications, operates in India under three entities, Aircel Cellular, Aircel Ltd and Dishnet Wireless Ltd. The company has initiated a process to merge Aircel Cellular with Aircel Ltd under which the former’s licence will be transferred to the merged entity.

The legal wing of the DoT is of the opinion that since there was a question mark over the validity of Aircel Cellular’s licence after the merger, DoT should not sign the tripartite agreement at this stage.

“It may not be proper to execute a tripartite agreement in case the validity of the licence itself is questionable,” the legal view stated. The DoT will ask the company to apply afresh after the merger process is completed.

Aircel has been struggling under a huge debt burden of over ₹20,000 crore. It had sought the loan from SBI to refinance the borrowings. The DoT move may not have any major impact on the company because Aircel can secure the tripartite agreements through Aircel Ltd and Dishnet Wireless. According to senior DoT officials, approvals will be given to the company to raise nearly ₹21,000 crore.

While Aircel Ltd is raising ₹8,538 crore from SBI and another $611 million through External Commercial Borrowings, Dishnet Wireless is raising ₹5,962 crore from SBI and a further $545 million through ECBs.

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