RCom offers Ericsson $18.8m but India won’t guarantee spectrum sale to Jio

07 January 2019 | Alan Burkitt-Gray

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Troubled Indian operation Reliance Communications (RCom) has made a part-payment of 1.31 billion rupees ($18.8 million) to Ericsson as their dispute escalated.

Ericsson told the Indian Supreme Court this morning that the payment offered by RCom was not enough – and said the company should pay the full 5.5 billion rupees ($78.9 million).

Even that is a fraction of what RCom originally owned Ericsson – which last year rejected the $78.9 billion offer and demanded a sum closer to $100-$150 million.

At the same time doubt is being cast on RCom’s plan to sell its spectrum – no longer needed as it has shut down mobile operations – to the unrelated rival Reliance Jio. The government’s Department of Telecommunications (DoT) is refusing to guarantee to Reliance Jio – which is owned by Anil Ambani’s brother Mukesh Ambani – that it would be immune to any past spectrum dues that RCom still owes.

A senior official in the DoT told the Times of India yesterday: “There is no question of giving any kind of immunity to the new buyer. It is public money, and we will take it from whoever owns it in case the corporate guarantee that RCom is providing us does not prove to be sufficient.”

Because of its precarious financial position RCom failed to obtain a bank guarantee for any unpaid dues – a gap that led Jio to seek an assurance from the DoT.

The Times of India cited unnamed sources claiming that Jio was looking at the implications of not being able to buy RCom’s spectrum. That would potentially completely derail the deal, leaving in doubt RCom’s plan to build a viable operation from its data centres, its enterprise telecoms business within India and its Global Cloud Xchange (GCX) international subsea operation (pictured).

GCX’s plans include the Eagle subsea cable from Mumbai westwards to the Middle East and the Mediterranean and eastwards to Singapore and Hong Kong.

Meanwhile the Supreme Court today decided not to act immediately on Ericsson’s request that RCom chairman Anil Ambani should be jailed for contempt. It said that RCom and Ambani should give a response in four weeks – that is, by 4 February.

Ericsson will then have a further seven days to file its own reply, said the Supreme Court judges.

After this morning’s hearing RCom deposited $18.8 million with the court, saying the money came “from the operational funds available with the company”.

RCom said it “has taken all required steps towards enabling the settlement and remains fully committed to make the payment to Ericsson from the proceeds of the spectrum sale”.

But yesterday RCom hit out at Ericsson, calling it “an operational unsecured creditor” that it said was “attempting a trial by media and sensationalising issues, as evidenced in recent media reports”.

It added: “Ericsson’s conduct as an unsecured creditor gravely endangers and is at the cost of secured lenders comprising 38 banks/secured creditors including 17 public sector banks and 13 foreign banks.”