In a new shocking turn of events, the Department of Telecommunications (DoT) has informed Reliance Communications and Reliance Jio Infocomm that it would not be able to clear their spectrum trading deal. This move is a new blow to the Anil Ambani led telecom operator, which stands under massive debt and has to repay its lenders at the shortest. As per an ET Telecom report, Reliance Jio earlier sent a letter to the department seeking assurance from the telecom department that Jio would not be held liable for RCom’s past dues on the spectrum. However, the government made it clear that it is against the spectrum trading norms, which outline that the buyer is liable for the dues which the spectrum seller has not cleared yet.
Jio Wanting to Do Away with Responsibility of Spectrum Dues
A senior DoT official said about the matter, “The trading rules clearly say DoT can ask both the operators or any one of them to pay the dues. Since Jio has imposed conditions, we cannot accept it (the deal) as it goes against the guidelines.” The official further added, “Now the ball is in their court. They have to decide and come back to us. Till then, this deal is off the table.”
The biggest blow out of this new decision is definitely delivered to Reliance Communications which was basing off its repayment to the Swedish manufacturer Ericsson amounting to Rs 550 crore out of this deal. The telecom operator has already missed the Supreme Court mandated deadline of December 15 for repayment to Ericsson and the recent denial of the agreement by the department only means that the telco will delay its repayment further. Previously, Ericsson had filed a contempt of court plea against the Reliance Communications Chairman, Anil Ambani, who had stood guarantee for repayment. Now Reliance Communications might be dragged in for insolvency proceedings along with an expected revision of the contempt of court plea.
RCom Likely to Further Delay Ericsson Payments
Earlier in the matter, Supreme Court had directed the Department of Telecommunications to clear the spectrum trading deal with the security of Rs 1,400 worth of corporate guarantees from Reliance Realty. The guarantees were submitted to the department to cover the spectrum user charge (SUC) of Rs 2,947 crore. The telecom department was of the opinion that in case there are any inconsistencies with the land parcel which Reliance Communications is providing as security, then Reliance Jio should step in to make the payments. However, with the recent letter to DoT, Reliance Jio has shed off any such responsibility.
To recall, the first time when the spectrum trading deal between Reliance Jio and Reliance Communications got stuck was in late 2017. The issues arose because the Department of Telecommunications demanded dues worth Rs 2,947.68 crores as a pre-condition for approving the deal. After a lot of legal struggle, the Supreme Court directed the department to accept a Rs 1,400 crore corporate guarantee as security against the pending spectrum dues. The spectrum trading deal between Reliance Jio and Reliance Communication will help the Anil Ambani led telco to pare its Rs 46,000 crore debt by Rs 18,000 crore.