Debt-laden Indian operator Aircel has become the first of the nation's mobile operator to receive approval to use spectrum as collateral for local and overseas loans.
India's Department of Telecom (DoT) has given in-principle approval to a plan by Aircel to raise more than 210 billion rupees ($3.49 billion) to help refinance its debt, according to India's Economic Times.
Aircel is using its spectrum and licenses in 15 service areas as collateral for the loans. This means that if it defaults, the DoT is authorized to re-auction the spectrum and pay off the lenders through the proceeds.
A debt refinancing could help make Aircel - which is 74%-owned by Malaysia's Maxis - a more attractive takeover target. Aircel, Tata Teleservices and Russia's Sistema were rumored to be considering a three-way merger last year, but no such deal has been announced.
Many Indian operators have accrued significant debt since participating in the nation's $15 billion 3G auction in 2010 and the subsequent 3G rollouts.
The DoT approved a facility allowing operators to pledge spectrum as collateral for loans in 2012 to help operators alleviate their debt burdens and make lending to Indian operators a more attractive proposition for banks.