If post-Pokharan sanctions and lingering after effects of the Asian financial crisis closed the doors to overseas loan markets, on the domestic side, the continued ambivalence over benefits under section 10 (23 G) of the Income-tax Act and stalemate between DoT and operators on cellular licence tenure extension to 15 years, rules out both the infrastructure bonds and conventional rupee loan avenues to many cellular ventures.

Take BPL-US West. It's $200 million syndicated loan is more or less off.

Would-be lead managers, Bank of America, ABN Amro Bank and Canadian Imperial Banking Corporation have resigned themselves to the reality that they will at best get to lead manage, a truncated forex loan sometime later in the year.

Meanwhile, ICICI has agreed to commit long-term project loans, but a substantialchunk will go towards squaring of short-term bridge facilities.For cellular operators, saddest, perhaps is the fiasco under section 10 (23G). Nearly Rs 2,300 crore of infrastructure bond offerings by cellular operators were in the pipeline in the days prior to the budget.

These included Hutchison Max's Rs 200 crore bonds, BPL Mobile (Rs 300 crore), Sterling Cellular (Rs 500 crore), Bharti Telenet (Rs 900 crore) and a fresh Rs 400 crore offering from Reliance Telecom.

Bond floatation were pending a clarification from the Central Board of Direct Taxes (CBDT) on the definition of `income' under section 10 (23 G). A CBDT clarification on income as in `gross income' or `net income' was expected.

The budget, however, proved to be a letdown with the inclusion of riders that only institutions set up for the specific purpose of investing in such offerings being allowed to avail of tax benefits under section 10 (23 G) and further that the same will apply only in the case of primary investments.

"Infrastructurebonds without section 10 (23 G) benefits may find investors...but then credit enhancement is a must given the state of cellular ventures currently," a leading investment banker said.

Even Reliance Telecom, which raised about Rs 600 crore through the issue of infrastructure bonds late last year, had ICICI's back-up guarantee. "If telecom finance is to pick up, projects must become viable from the lenders point of view...few financial intermediaries will be willing to issue guarantees to inherently weak projects or those that are turning out to be so...on account of high licence fee and askew revenue per subscriber projections," say bankers.

In the case of Hutchison Max, with its Rs 200 crore bond issue far from fructifying, short-listed lead managers, ANZ Investment Bank and HSBC, are reportedly looking at a conventional loan option, say sources. But this route again, may benefit only a few like Hutchison Max or a BPL-US West.

Relatively stronger players are seen making it with rupee loans, but for therest, the going is seen proving to be tough. As investments bankers here say, demand for rupee loans from cellular operators are getting difficult to be satisfied.

"The problem is the viability of cellular ventures...most are bleeding and there is no news yet of an extension in licence tenure...pleas for a moratorium on interest payment have gone unheeded," said an industry source.The 10-year cap imposed by their cellular licences is seen restricting long-term rupee project loans to quite a few ventures.