Ever since Reliance Communications got surrounded in the competition after 2016, the telecom operator has been battled down by trouble from all sides. In a new development involving its attempt to crawl out of the slump, RCom has told the Department of Telecommunications that it will furnish bank guarantees worth Rs 774 crores to sell spectrum to Reliance Jio Infocomm which will enable the telco to fulfil its repayment pending for the airwaves.
Notably, the airwaves were bought by Reliance Communications in 2013 and 2015 auctions with the option of payment being made over 18 years. However, the current situations rendered the telco helpless with the amount. Now with the bank guarantees, the government can be assured of payment over a decade summing up to Rs 15,000 crore.
As informed by ET, a DoT official remarked about this new declaration, “There was a letter this week which assured the Department of Telecommunications that not only will bank guarantees of Rs 774 crore be taken care of but Jio will take care of the future spectrum related liabilities over the next 15-16 years.”
Back in April, the department had to encash bank guarantees submitted by Reliance Jio for Rs 900 crore after license breach by the carrier. The department also said that the telco hadn’t replenished its lapsed bank guarantees. All questions posed to the operator went unanswered. However, people aware of the matter said that RCom would likely furnish the bank guarantees for Rs 774 crores on Friday. On the same day, the telco will also go against the DoT in the Telecom Disputes Settlement and Appellate Tribunal for cancelling its licences.
Reliance Communications had pleaded to the authorities citing that DoT’s notice was “illegal, arbitrary and without jurisdiction.” Also, if the licenses were to be revoked it would have been a significant hurdle in Reliance Communication’s way of selling its assets to Reliance Jio - a deal which will decide the company’s fate in coming times.
The tribunal had explicitly directed the department not to take any action until the hearing was completed on August 10. Then it was RCom who informed the TDSAT that the department had already encashed the bank guarantees back in April. Reliance Communications made it clear that if licenses were to be cancelled then the DoT would suffer the blow as well since there is a lack of buyers in the market for spectrum in already financially stifled telecom sector.
The DoT official acknowledged the position of the telecom department and said: “We will get nothing by cancelling the licences and would have lost the money.”
To recall, Reliance Communications had dodged insolvency by making a deal with Ericsson – one of the creditors of the company and also some minority investors as well. The Supreme Court had also given its green flag to the Anil Ambani led telco that it was clear to proceed with its wireless assets sale to Reliance Jio, a deal which would help the telco pare its colossal debt.