Reliance Communications (RCom) has remarked that its deal of spectrum trade with Reliance Jio Infocomm will land in jeopardy if the Department of Telecommunications (DoT) does not accept a land parcel instead of bank guarantees as security. DoT, however, is adamant on only receiving bank guarantees worth of Rs 3,000 crore from the telco and has also stated that Reliance Jio can furnish these guarantees on behalf of RCom. This struggle between RCom and the department in ensuing because RCom wants its spectrum trading pact cleared from the DoT.
DoT Asks Jio to Furnish Guarantees Instead of RCom
As per a report by ET Telecom, a person aware of the matter said, “RCom told the apex court that if DoT does not give a NOC (no-objection certificate) to the spectrum trading deal with Jio, then the deal will fall through. The operator argued that DoT should accept the land parcel as a guarantee as per an earlier order, but DoT refused.”
To recall, after facing brutal competition by the entry of Reliance Jio into the industry, Reliance Communications was financially troubled by widening losses when it decided to shut its operations. However, the telco owes a massive Rs 46,000 crore debt to its vendors like Ericsson. Now the Anil Ambani led company depends on the Reliance Jio Infocomm deal, which would help the telco pare its massive debt.
As per the sources, now the Supreme Court has set December 15 as the next deadline for RCom’s payment to Ericsson. While Kapil Sibal assisted by an advocate, Mahesh Agrawal spoke for RCom’s stance, PS. Narasimha represented DoT. Keeping forth DoT’s position, the representative said that since RCom is refusing from furnishing bank guarantees, then Reliance Jio can do the same on RCom’s behalf.
RCom’s DoT Dues Create Troubles for the Telco
DoT and Reliance Communications are going back and forth over the issue because the telecom operator owes the department Rs 2,947.68 crore as part of spectrum dues. As such, the department is reluctant to give an affirmative nod to the Reliance Jio deal for RCom unless the dues are cleared.
Back in October, an interim order was passed by Telecom Disputes Settlement and Appellate Tribunal (TDSAT) which directed DoT to “expeditiously” allow the debt-laden carrier to sell its spectrum to Reliance Jio without the bank guarantees. The tribunal also directed Reliance Communications to keep the Rs 1,400 crore land parcel intact which would be used in lieu of bank guarantees against the government’s demand for the dues. DoT was, however, reluctant to give in to the direction passed by the TDSAT and thus moved to SC to recover its dues.
Reliance Communications has been on a ticking clock since it shut down its operations. The company owns a massive due to Ericsson, and HSBC Daisy Investments, which it seeks to clear after its deal with Reliance Jio goes through. However, because of the delay in the deal majorly caused by DoT’s demand of dues, the telco hasn’t been able to follow up to the timeline of payment and stay true to its commitment.
Also, another report by ET telecom had highlighted that the Anil Ambani led telco had a close call with bankruptcy as the cash-strained telco was hit with legal proceedings with American Tower Corp (ATC). Right now, Reliance Communications remains under a debt of Rs 46,000 crore and is looking forward to its sale of assets for Rs 18,000 crore to Jio and Brookfield which would pare its debt. Also, the telco will rush to pay the Swedish company, Ericsson before December 15th as directed by the apex court.