RCom Risks Losing License If Bank Guarantees are Not Furnished: DoT

The Department of Telecommunications has asked Anil Ambani-led company Reliance Communications (RCom) to furnish bank guarantees worth Rs 774 crores towards spectrum dues pending next year. The DoT has explicitly said that if the telco fails to do so, then it will risk losing its licenses. It is noteworthy that Reliance Communications had stopped its operations entirely in December 2017 and now seeks to pare its debt of Rs 46,000 crore by selling its wireless assets worth Rs 18,000 crore to Reliance Jio. Two people aware of the matter conveyed the news to ET, they also added that the notice from DoT was sent in the last week of June to Reliance Communications.

rcom-spectrum-dot

RCom, on the other hand, has given in to the department’s demands saying that it would furnish bank guarantees by the end of July to keep things straight for itself. If not complied, Reliance Communications might sabotage its deal with Reliance Jio, which might be a fatal move for the telco. However, Reliance Jio has added that the DoT has withheld bank guarantees worth Rs 2,540 crore which the Telecom Dispute Settlement and Appellate Tribunal (TDSAT) had directed to return to the company.

To this claim, the department has said that it intends to fight the ruling of the TDSAT in the Supreme Court. One of the people aware of the matter asserted “The notice was received and replied to earlier this month. The amount of `774 crores will be given in bank guarantees, but DoT also has to return the bank guarantees with them as ordered by TDSAT.”

If Reliance Communications fails to furnish bank guarantees, then the DoT might cancel the sale of spectrum thus delaying the deal with Reliance Jio. Reliance Communications, once the second largest telco of the country, was hit by massive losses after the industry grew competitive in 2017 post the entry of Reliance Jio. However, despite RCom’s claims of furnishing the bank guarantees on a timely manner, it is doubtful from where Reliance Communications is going to bring in cash from since the company has struggled to pay pending dues from last year. If RCom fails to furnish bank guarantees, DoT will seize the spectrum thus freezing RCom’s assets and failing the Jio-RCom deal.

According to an ET report, Reliance Jio in its deal with RCom will likely buy the wireless assets—including 122 MHz of spectrum, the fibre network, telecom towers and nodes form the Anil Ambani-led company for Rs 18,000 crore. Canada’s Brookfield will also purchase the company’s real estate in Delhi and Chennai for Rs 800 crore. For RCom, Jio will likely take deferred spectrum liabilities, which will waive another Rs 8,000 crore debt off of RCom.

The funds which Reliance Communications will get will be used to repay its 39 financial lenders, in the July-September quarter. After facing a lot of legal troubles and soaring through it, Reliance Communications has finally obtained a no-objection from the 39 banks, and the rest are expected to come through in a week or so. Notably, Reliance Communications had also approached TDSAT to contest the demand for one-time spectrum charges (OTSC) due towards payment of market-linked prices for excess spectrum, which the DoT had raised in 2015. Later, the TDSAT had ruled in favour of RCom directing the DoT to release Rs 2,000 crore worth of bank guarantees which Reliance Jio had provided before.

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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Nikhil Mumbai-PuneChetan Recent comment authors
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Update: rcom has already moved TDSAT today against this cancellation threat received last month and Tdsat has restrained DOT to make any cancellation move till next hearing date of 10th August.

Nikhil Mumbai-Pune
Nikhil Mumbai-Pune

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