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Tribunal calls for fast RCom spectrum sale to pay debt to Ericsson and tower shareholders

Mumbair RCom.jpg

India’s telecoms tribunal handed a possible lifeline to Reliance Communications (RCom) this morning by allowing it to sell spectrum in order to release funds for two debtors.

Ericsson filed a contempt of court petition earlier this week in India’s Supreme Court against RCom, which owns Global Cloud Xchange (GCX), alleging the company had missed a payment of 5.5 billion rupees ($74.6 million).

However the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) this morning asked the Indian government’s Department of Telecommunications (DoT) to approve RCom’s sale of spectrum to the unrelated Reliance Jio Infocomm so that it can pay debts.

Ericsson said in its petition to the Supreme Court that Anil Ambani, the owner of RCom, and other senior officials “have no respect for the law of the nation and have abused the process of law”. Ericsson had a contract from RCom to manage its Indian mobile network.

RCom said this week that it had asked the Supreme Court for another 60 days to repay Ericsson’s debt.

According to reports today from Mumbai, RCom will use the funds from the spectrum sale to pay Ericsson and a further 2.3 billion rupees ($31.2 million) to minority shareholders of Reliance Infratel, its tower infrastructure unit.

Reports say that RCom hopes those payments will help it avoid threats of insolvency proceedings.

The company said in a statement to Indian stock exchanges: “RCom had challenged the unjustly sought security for the alleged demands by DoT (which are wholly disputed) for spectrum usage charges.” It said the tribunal had stayed the DoT’s demands. However, reports also say the DoT can appeal against the tribunal’s decision.

While RCom may have a brief breathing space, especially if the DoT does not sue and the company has until the end of November to pay up, it has had to undertake not to sell land said to be worth 40-60 billion rupees ($540-$810 million) in Navi Mumbai.

Ericsson’s petition called for a stay on “any further sale of assets with immediate effect” and to reverse earlier sales, including RCom’s sale of switching nodes and fibre to Reliance Jio, as part of a withdrawal by RCom from the Indian consumer mobile market.

RCom’s plan is to focus on enterprise telecoms and data centres in India, and its GCX global subsea network. It has two bids, each for $1.1 billion, to buy the surviving business. One is from the private equity company that owns HGC Global Communications.  

The next hearing of the case is on Tuesday 16 October.

 

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