India’s Department of Telecommunications (DoT) has given Aircel, the country’s sixth-largest mobile operator, permission to raise loans totalling INR215.8 billion ($3.6 billion) in order to refinance its debt.

According to a DoT internal note seen by the Economic Times, the loans can be raised both locally and overseas – using Aircel spectrum as collateral – through a consortium led by the State Bank of India.

Aircel, 74 per cent owned by Malaysia’s Maxis Communications, is the first of the country’s mobile operators to use spectrum assets to raise money.

DoT has sanctioned domestic borrowings of INR145 billion and international loans of INR70.8 billion.

The internal note, reports the newspaper, doesn’t impose any obligations on the government as a guarantor of the loan.

The operator has licences to provide 2G services in 22 telecom circles (regions), 3G in 13 service areas, and 4G in eight circles (although it has yet to launch 4G operations). Of those licence areas, Aircel has pledged spectrum as collateral in 15 circles.

Mainly because of heavy outlays on wireless frequencies, and the expansion of its 2G and 3G operations, the Economic Times reports that Aircel’s debt has ballooned to around INR240 billion. And according to DoT data, released January, Aircel had a total negative worth of nearly INR42 billion.

Re-financing debt, say analysts, should make Aircel more attractive to a potential buyer.

In the event that Aircel defaulted on its loans, DoT, according to a senior official speaking to the Economic Times, would then have the right to auction the pledged spectrum to pay off lenders.