Reliance Communications Spectrum Auction Plan Hits a Snag After DoT Delivers a Blow

Reliance Communications, the bankrupt telco has been seeking a way to recover its dues by selling its assets, mainly spectrum

Highlights
  • Until now, the telco has sold its fibre and node convergence assets to RJio for a total of Rs 5,000 crore
  • During the corporate insolvency process, DoT has demanded Rs 20,000 crore from RCom

Reliance Communications (RCom) has hit a new hurdle in its insolvency process, falling into the hands of uncertainty about whether or not the resolution professional will be able to sell its most valuable asset – spectrum, as per a new ET Telecom report. According to the insolvency professionals, the telecom operators may refrain from buying spectrum from Reliance Communications to avoid a clash with the Department of Telecommunications (DoT) and might instead go for buying spectrum from the upcoming auctions. This might be because of the spectrum-related dues which would accompany the buying of spectrum in case telcos decide to buy from Reliance Communications.

Telcos Might Refrain from Buying Spectrum from Reliance Jio

According to one person, “The residual fibre and all the towers are likely to be sold, but it is unlikely that there will be any takers for the spectrum,” he further added, “No one wants a legal battle with the telecom department and an operator might as well buy spectrum from the upcoming auction, which will have validity for the next 20 years.” It is worth noting that Reliance Communications’ wireless assets include 4G airwaves across four bands. Besides the spectrum, Reliance Communications also currently holds 43,000 telecom towers under the tower firm Reliance Infratel which would also be put up for auction to rake in cash flow to recover some of the debt.

The Department of Telecommunications (DoT) had remarked to the National Company Law Tribunal in the Aircel insolvency proceeding that spectrum is something that is leased to the telecom operators for 20 years and it should be returned by the insolvent telcos like Reliance Jio and the Maxis-owned telecom firm for failing to pay the dues. The department added that eventually the spectrum is the government’s property and it should be returned likewise.

Reliance Jio Refuses to Take on RCom’s Spectrum Dues

A resolution proposal filed by the creditors of Aircel was dismissed by DoT which had proposed Rs 16.5 crore for all operational creditors of Aircel including the government which was deemed to be too low for covering the license and spectrum-related dues. On this, the department reiterated its stance that the spectrum can’t be sold by the resolution professional. While telcos are allowed trade-in spectrums, the prerequisite for that is payment arrears clearance for the airwaves, for spectrum usage charges, one-time spectrum fee and bank guarantees for covering them.

RCom’s plan to sell its assets to Reliance Jio hit a snag when DoT scrapped the deal after the Mukesh Ambani led telecom operator refused to be held liable for Reliance Communication’s past dues. A DoT official said regarding this, “This is a business case for the telcos. They will have to take a call on whether they are willing to pay past liabilities and deal with the DoT or go for a new set of airwaves when the auctions happen. The government will not give up its spectrum without a battle.”

During the corporate insolvency process, DoT has demanded Rs 20,000 crore from RCom. The financial creditors of the bankrupt telco have claimed about Rs 49,193 crore from the operator, which went under after raking in debt of Rs 46,000 crore and failing to pay its lenders and vendors. Till now, RCom has sold its fibre assets to RJio for Rs 3,000 crore and other infrastructure for Rs 2,000 crore.

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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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