21 May 2018
| Alan Burkitt-Gray
Pressure is mounting on heavily indebted Reliance Communications and its Global Cloud Xchange subsidiary after India’s insolvency tribunal put professionals in place to run three units.
India’s bankruptcy court, the National Company
Law Tribunal (NCLT), appointed three separate interim
resolution professionals, one each to run Reliance
Communications (RCom), Reliance Telecom and Reliance
The three are charged with seeking ways to revive the
companies, whose debts total around $6.75 billion, and repay
creditors. Global Cloud Xchange (GCX) was not mentioned
specifically in the move. People close to GCX told
Capacity that the unit is ring-fenced from the rest of
RCom and is not impacted.
The NCLT’s action came as the Times of India
reported RCom was in advanced talks with Ericsson about
settling RCom’s debt in a move to avoid insolvency
and bankruptcy proceedings.
Ericsson last year began a winding-up order against RCom in an
attempt to force it to pay up. The China Development Bank took
similar action over its $2 billion debt, but withdrew the move
The newspaper reported one source telling it: "The amount to be
paid [by Ericsson] is being discussed for settlement." Another
source said: "Talks are on but no formal proposal has been
RCom said in a stock exchange statement: "We confirm that RCom
and Ericsson are at an advanced stage of discussions to
expeditiously resolve commercial issues. This will enable
Reliance Communications to exit the NCLT process." The company
added: "RCom is confident to expeditiously proceed with its
monetisation plan with Reliance Jio and overall resolution plan
with the lenders, keeping in mind the interests of all
The paper reported that the amount being discussed was 7-8
billion rupees ($100-$150 million), after Ericsson rejected an
offer of $60-$70 million. According to reports Ericsson has
asked the State Bank of India to guarantee the debt.
Capacity asked senior executives of GCX to comment
about the implications of the action by the NCLT. With interim
resolution professionals in place, RCom is unable to sell
assets without their approval.
This will prevent RCom from selling its spectrum and
infrastructure, including fibre and towers, to unrelated rival company Reliance Jio for
about $2.6 billion.
Reliance Jio is understood not to be interested in
GCX’s international subsea and terrestrial
network, and the group had been talking a number of potential
bidders about the asset.
In March RCom was talking to Russian industrial group Sistema
about GCX, but last month a report said Sistema was still
interested in RCom’s enterprise business and data
centre operations but no longer wanted GCX.
Under the original Ericsson petitions, insolvency proceedings
should have started last week against RCom. The
NCLT’s interim resolution professionals now have
270 days to find a solution to revive RCom or put in into
liquidation – which takes us to mid-February
A resolution may well take as long as that. If Ericsson and
RCom come to an agreement, both companies will need approval
from a higher court to end the bankruptcy process. Special
permission would be needed if RCom wanted to sell its assets
– including its spectrum, towers, real estate and
Global Cloud Xchange,