Telecoms owe the banks £11bn

THE crisis in the telecoms and new media sector is the latest banana skin for banks. Troubled operators Marconi, Energis, NTL and Telewest owe a total of more than £11bn in bank debt. Fortunately for the banks, loss-making ITV Digital does not owe them money, but has so far been propped up by its shareholders, Granada and Carlton.

The enormous telecoms exposure comes when lenders have already been hit by the economic crisis in Argentina and high-profile corporate collapses, Enron being the biggest.

Banks farm out large loans to a syndicate of lenders, to avoid keeping the full risk on their balance sheet. Nonetheless, the big UK banks' exposure to the sector remains significant.

The potential losers do not stop at the banks. Bondholders, typically City fund managers investing pension scheme money, hold billions of pounds worth of bonds issued by telecoms and media companies. These could become worthless if the businesses go under. Firms supplying equipment to operators could also lose significant revenue.