After a long legal struggle with the Anil Ambani led telecom operator, Reliance Communications, the Department of Telecommunications (DoT) has informed the Supreme Court that it will be granting clearance to the spectrum sale deal of RCom to Reliance Jio. This move comes as a big relief to the financially stricken telco as now it will be able to receive payment from Reliance Jio, which will be used to pare off its debt and clear its dues of financial and operational creditors. Previously in this matter, Reliance Communications had submitted the corporate guarantees worth Rs 1,400 crore to the DoT which are the basis of the clearance of this spectrum deal. The DoT, on the other hand, had asked for guarantees instead of RCom’s spectrum-related dues which are worth Rs 2,947.68 crore.
Due Diligence Causing Delay in Deal Clearance
The clearance of the spectrum sale to Reliance Jio means that Reliance Communications will receive a no-objection certificate from DoT which will allow the telco to move ahead with the asset sale to Reliance Jio and its real estate deal with Brookfield to go through. This would mean that the telco will now finally be able to pay off Swedish manufacturer Ericsson.
The legal battle between Reliance Communications and the Department of Telecommunications has now been going on for a few months. Previously, the DoT was reluctant to receive a land package as a guarantee against the spectrum related dues. However, SC later passed an order which ensured that the DoT gets Rs 1,400 crore worth of corporate guarantees from Reliance Realty for the clearance of the spectrum sale deal. After that, the SC directed the telecom department to clear the RCom and Reliance Jio deal within seven days of receiving the guarantees. However, the department caused a delay in granting clearance to the deal citing due diligence issues.
RCom In Trouble After Defaulting on Ericsson Payment Deadline
This has been a sign of trouble for the Anil Ambani led telco because previously the telecom operator was given December 15 as the deadline for paying back Ericsson, but the delay caused by DoT has made repayment of the dues by RCom tough. The operator had also appealed to the SC asking for an extension in the payment deadline. However, the appeal was dismissed by the court on Thursday.
Ericsson’s legal representative informed ET Telecom that if the operator fails to make payment, in that case when the court reopens after winter break, the contempt petition and the insolvency order will be listed. It is worth noting that Reliance Communication owes Rs 550 crore to the Swedish manufacturer Ericsson. Additionally, Reliance Communications also has to pay off its 39 financial and operational creditors including minority shareholders of Reliance Inftratel. The total debt of Reliance Communications, right now, stands at Rs 46,000 crore.
Arpit spends his day closely following the telecom and tech industry. A music connoisseur and a night owl, he also takes a deep interest in the Indian technology start-up scene and spends rest of his time spilling poetry and stories on paper.