Much recently, the National Company Law Appellate Tribunal (NCLAT) said that the telcos under insolvency process or Insolvency and Bankruptcy Code (IBC) can’t ‘use or transfer’ their spectrum until the time they have cleared all government dues.
Because of the decision, RCom and Aircel’s resolution plans have taken a hit. According to an ET Telecom report, the lenders of Aircel and the UV Asset Reconstruction Company Limited (UVARCL) might approach the Supreme Court (SC) to oversee the NCLAT judgement.
For the unaware, UVARCL is the resolution company that will take over the assets of Aircel and RCom under the insolvency process. The lenders led by the State Bank of India (SBI) and UVARCL fear that their resolution plans will not go as planned if they aren’t allowed to sell the spectrum owned by the two companies.
Spectrum Sale Would Generate Big Amounts For the Companies
The lenders hoped to recover around 25,000 to 30,000 crores from the resolution plans of Aircel and RCom under IBC against their total claims of Rs 1,16,000 crores.
For the unaware, Aircel and RCom owe the government about Rs 38,000 only in the adjusted gross revenue (AGR) dues, where Aircel owes Rs 12,389 crores and RCom owes Rs 26,000 crores, respectively. The Department of Telecommunications (DoT) is further looking to get Rs 14,000 crores from Aircel as an operational creditor for defaults on timely payments and also for the right to use spectrum.
But ideally, in the waterfall arrangement, financial creditors are prioritised over operational creditors. Hence, DoT might not get anything here if the case goes to the SC. UVARCL’s plans for Aircel includes payment of only Rs 28.50 crores, i.e., 0.16% of the total claims of Rs 17,462 crores for the operational creditors.
If the telcos aren’t allowed to sell the spectrum, they will be forced to go towards liquidation. When that happens, the lenders will be hit massively, amongst which SBI, which loaned Rs 12,000 crores to Aircel and RCom, will be hurt the most.
UVARCL was expecting to generate the biggest chunk of amounts by selling the spectrum of Aircel in the 1800 MHz and 2100 MHz bands for anything between Rs 800 to Rs 1,300 crores.
One telco that remains unharmed despite the decision ruled by NCLAT is Videocon. Since the telco transferred its spectrum in the 1800 MHz bands to Airtel back in 2016, it doesn’t fall into the purview of the recent NCLAT order.
The SC had also asked the same question during the AGR case and left the decision to NCLAT last year.