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Ericsson demands jail for RCom/GCX chairman Anil Ambani over $78.9m debt

Anil Ambani.jpg

The fight for the future of Reliance Communications (RCom) goes back to the Indian Supreme Court on Monday, with Ericsson asking for the company’s chairman, Anil Ambani, to be jailed for non-payment of a debt of 5.5 billion rupees ($78.9 million).

At the same time the Supreme Court will also hear a petition for contempt of court by RCom against the government’s Department of Telecommunications (DoT).

RCom alleges that the DoT is holding up its agreed sale of spectrum to unrelated rival Reliance Jio – a deal that would release the funds for RCom to pay off Ericsson. In December the DoT told RCom it could not sell its spectrum to Jio as the proposed deal “does not conform to its guidelines”.

Ericsson also wants to revive an insolvency petition against RCom, initially agreed with the National Company Law Tribunal (NCLT), India’s bankruptcy court. If this goes ahead, it could potentially lead to a court-enforced break-up of RCom and its international subsea arm, Global Cloud Xchange (GCX).

This legal paralysis is also holding up plans for RCom and GCX, to negotiate with a purchaser. The group has two bids for the business from international investors involving GCX, its Indian data centre business and its Indian enterprise telecoms business.  

Ericsson will call on Monday for Ambani, the chairman of RCom, to be held in a civil prison and prevented from travelling out of India unless he ensures the $78.9 million is paid. According to reports, Ambani has given a personal guarantee of the debt.

Capacity asked RCom for comment but has not so far received a response.

Senior advocate Anil Kher, representing Ericsson, told Indian newspaper Economic Times: “The fresh application was filed because RCom and others did not comply with the [Supreme Court] order. We have been waiting for payments for a long time and their default is contempt of court.”

Kher warned: “Under contempt of court act, if found guilty, this could lead to civil imprisonment, which means jail up to six months.”

Ericsson has been fighting for its money for a long time. In 2018 RCom managed to get the debt to Ericsson reduced, with the agreement that the remaining $78.9 million should be paid by 30 September. RCom missed that deadline and Ericsson started its first contempt action against the company. The Supreme Court gave the company an extended deadline, of 15 December – but that was missed too, largely because the DoT is refusing to approve the spectrum sale.

RCom is hoping that, if legal barriers are removed, it can sell its spectrum to Reliance Jio, which is owned by Anil Ambani’s brother, Mukesh Ambani. It has already sold towers, switches and fibre infrastructure to Jio. At the same time it wants to sell its spare real estate to Canadian company Brookfield.

The two bids for GCX, the data centres and the Indian enterprise telecoms business are both for $1.1 billion. One comes from I Squared Capital (ISQ), the company that owns Hong Kong-based HGC Global Communications.