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.

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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.