Supreme Court grants reprieves to RCOM and Aircel

30 Nov 2018

India’s apex court has given Reliance Communications (RCOM) permission to complete its long-delayed spectrum sale to Reliance Jio Infocomm (Jio), the Economic Times reports. RCOM has been locked in a dispute with the Department of Telecommunications (DoT) over the transaction, with the latter refusing to greenlight the transfer of airwave rights to Jio until it receives bank guarantees totalling INR30 billion (USD429 million). RCOM is relying on completing the transaction to pay dues to creditors, including Swedish vendor Ericsson. Earlier this year, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) had directed the DoT to clear the spectrum sale, with RCOM to use a parcel of land worth INR14 billion as a guarantee against the government’s demand. The DoT challenged the decision, however, saying that it could not accept the land as a guarantee. As previously reported by TeleGeography’s CommsUpdate, RCOM is under pressure to complete the deal to pay off Ericsson and others. In May this year the operator agreed a settlement with the vendor under which it would pay Ericsson INR5.5 billion – just over half the amount Ericsson says it is owed – by 30 September, in exchange for the Swedish company dropping its legal challenges to the transfer of assets from RCOM. Fresh opposition from the DoT delayed the completion of the spectrum sale and forced the cellco to overshoot that date, but RCOM was granted an extension to the deadline until 15 December. Should RCOM fail to meet this deadline, however, its asset sale will be reversed and insolvency proceedings will begin.

In a related development, meanwhile, Aircel was also granted a reprieve by the Supreme Court, with the apex body ordering the DoT and Airtel to pay a combined total of INR7.51 billion to the bankrupt operator. In its decision, the court instructed the DoT to refund INR2.98 billion to Aircel that was paid in relation to the cellco’s sale of spectrum to Airtel in 2016. Similarly, Airtel was told to explain why it had not paid Aircel dues of INR4.53 billion, also in relation to the spectrum sale. Airtel had submitted the funds and bank guarantees to the DoT on behalf of the cash-strapped Aircel, after adjusting the value of their spectrum deal. With the guarantees now lapsed, the funds are due to be returned to Aircel, but neither the DoT nor Airtel has done so. The Economic Times notes that Aircel will use the money preserve assets that will be sold under an ongoing insolvency process.

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