RCom and DoT Go Hard on Legal Battle, Telco Files Contempt of Court Plea Against Department

By December 11th, 2018 AT 6:53 PM

Anil Ambani led telecom operator, Reliance Communications (RCom) has filed a contempt of court plea against the Department of Telecommunications (DoT) for not clearing its spectrum sale deal to Reliance Jio in the stipulated period. To recall, DoT had agreed to grant clearance to RCom for selling its assets to the Mukesh Ambani led telco to obtain cash for paring its debt. However, this recent plea in the Supreme Court by RCom has intensified the war between the cash-strained telco and the government.

rcom-dot-court-legal-battle

Legal Battle Between RCom and DoT Grows Harsh

According to an ET Telecom report, the telecom operator had to file the plea after the DoT, “did not follow the apex court’s direction and grant them the approval for spectrum sale within seven days of receiving corporate guarantees.”

When fired with questions from ET, Reliance Communications remained silent. Notably, the telco had been locked in a legal battle with the department over spectrum related dues worth Rs 2,947.68 crore, which it owes to the DoT for many months. When the matter of clearing the deal reached Supreme Court, the bench directed the DoT to grant clearance to the sale of spectrum to Reliance Jio on the condition that Reliance Communication furnishes corporate guarantees of Rs 1,400 crore to DoT. After the decision, Reliance Communications had stated that it furnished the Rs 1,400 crore corporate guarantees to DoT, whereas the department did not grant clearance to Reliance Communications for the sale of spectrum assets to Reliance Jio.

This deal to Reliance Jio is part of a bigger Rs 18,000 crore transaction which involves the sale of switching nodes, fibre, telecom towers and spectrum to Jio, and real estate to Canada’s Brookfield. The nodes and spectrum as of right now have been sold for Rs 5,000 crore.

To recall, RCom stands under a staggering debt of Rs 46,000 crore, and it is imperative for the telecom operator that the sale of the assets go through at the earliest so that it can pay off its 39 financial lenders. Out of this deal, RCom is slated to pay Rs 975 crore to Ericsson (Rs 550 crore plus interest), an operational creditor for Reliance Communications and HSBC Daisy Investments among others. The telco plans to pay these creditors and shareholders in Reliance Infratel, by December, which is also the deadline mandated by the apex court. It is also worth noting that in case Reliance Communications defaults on these payments, then the telco might be dragged in for insolvency proceedings.

DoT Waiting for Due Diligence on Corporate Guarantees

A DoT official under anonymity said, “The approval will happen very soon, but we need to do our checks on the corporate guarantee before agreeing to anything.” The corporate guarantee which the company has furnished to DoT involves a Rs 1,400 crore land package from Reliance Realty.

As part of the sale to Reliance Jio, Reliance Communications will be selling 122.4 units of 4G airwaves across the 850 MHz, 900 MHz, 1800 MHz and 2100 MHz bands and above 43,000 telecom towers which are the property of Reliance Infratel.

Earlier, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) had concluded and directed RCom to pledge a land package worth Rs 1,400 crore instead of bank guarantees, which the DoT was demanding. However, the government was opposed to this decision. On Monday, SC had sent out a notice to the regulator seeking a response on an appeal filed earlier by RCom.

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.

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