However, the company refused to comment on the matter saying that its next move will be dictated after studying the court order carefully
Reliance Communications Ltd (RCom) will challenge National Company Law Tribunal’s (NCLT) move to admit Swedish gear maker Ericsson’s petition if it jeopardises the resolution plan approved by a clutch of domestic lenders to settle dues of close to Rs 45,000 crore. Domestic bankers are also planning to support the Anil Ambani-controlled telecom company to ward off Ericsson’s move so that their dues are not compromised. However, the company refused to comment on the matter saying that its next move will be dictated after studying the court order carefully.
A senior banker said, “The company is likely to approach the NCLAT and the consortium of bankers will support a move so that our money is protected.”
Under the resolution plan worked out with the domestic lenders the company was to sell of most of its wireless assets to Reliance Jio, controlled by Anil Ambani’s elder brother Mukesh Ambani for an undisclosed value.
On Wednesday, HSBC Daisy Investment petition opposing the sale of the tower assets of Reliance Infratel the tower subsidiary of RCom came up for hearing in the Supreme Court but was adjourned for May 17. The apex court had earlier has allowed the sale of the tower and fibre business, but insisted that the proceeds be escrowed, while allowing the spectrum, fibre, media convergence network (MCN) assets and real estate to be sold off.
On May 14, NCLT Mumbai admitted three insolvency petitions filed against RCom and its subsidiaries, Ericsson, which will now its plans of selling its telecom assets.
RCom shares fell 15.20% to close at Rs 10.55 a share on Wednesday following the development.
The battle is for the repayment of Rs 1,155 crore of dues, which Ericsson alleges that RCom owes it for managing and operating the former’s telecom network in a seven-year agreement that both the companies had inked in 2014. RCom says it owes only Rs 60 crore to Ericsson. The issue for bankers is that under the Insolvency and Bankruptcy Code an insolvency resolution needs to be completed in nine months, after which the company has to be liquidated.
In the third quarter of the last financial year, RCom announced to exit from RBI’s strategic debt restructuring framework after it signed definitive binding agreements for sale of wireless, spectrum (excluding 4G spectrum under sharing), tower and MCN assets.
The company shut down its consumer mobile business late last year unable to survive the aggressive pricing strategy adopted by Reliance Jio which offered free voice and undercut the prices of data plans.
For RCom, this would be the second time in the last two years that its attempt to bring down debt is thwarted due to legal hurdles. Last year, courtroom battles were one of the main reasons its merger deal with Aircel and the tower sale to Brookfield did not go through.
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