NCLT allows Ericsson’s insolvency plea against RCom
Ericsson, which signed a 7-year deal in 2014 to operate and manage Reliance Communications’ nationwide telecoms network, is seeking Rs1,155 crore from the firm and two of its subsidiaries
Sankalp Phartiyal, Reuters
Mumbai: The National Company Law Tribunal (NCLT) on Tuesday admitted an insolvency plea filed by Sweden’s Ericsson against Reliance Communications, potentially delaying the Indian firm’s plans to sell assets to lighten its debt load.
Ericsson, which signed a seven-year deal in 2014 to operate and manage Reliance Communications’ nationwide telecoms network, is seeking Rs1,155 crore ($170 million) from the company and two of its subsidiaries.
Worries about the ability of RCom, as the company is widely known, to repay its near $7 billion debt to Indian and foreign banks have been mounting for more than a year.
Like other incumbents in India’s telecoms sector, RCom has been hit by a fierce price war over the last year, especially after the entry of Reliance Jio, which offered free voice and cut-price data plans.
Run by wealthy businessman Anil Ambani, RCom has said it plans to reduce its debt by selling assets such as airwaves, mobile masts and fibre optic investments.
The company also plans to sell most of its wireless assets to Reliance Jio - controlled by the country’s richest man and Anil’s elder brother Mukesh Ambani - in a deal sources said was worth about $3.8 billion.
However, Tuesday’s order from the NCLT means that the asset sale would now be overseen by a court appointed administrator.
A lawyer for RCom said it would appeal. The company in a press release said it would decide the next course of action after studying the detailed orders of NCLT.
Under India’s bankruptcy law, insolvency resolution needs to be completed within a maximum 9 months, failing which the company is liquidated.
With debt of Rs45,733 crore ($6.7 billion) at the end of March 2017, RCom is the most-leveraged of all listed telecoms carriers in India.
The company shut down its consumer mobile business late last year.
RCom’s asset sale plan has also stalled as it faces a separate legal challenge after HSBC Daisy Investments (Mauritius) Ltd filed a petition accusing the company of oppression of minority shareholders and operational mismanagement.
RCom shares closed down 8.2% on Tuesday in a broader Mumbai market that ended largely unchanged. The company is set to report earning for the quarter ended March on 19 May.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.
- Tesla to cut workforce by 7%, sees smaller profit in Q4
- Wipro spins out govt business as separate segment
- Vibrant Gujarat meet: Ambani, Adani, Birla, others line up big investments
- Wipro announces 1:3 bonus; Q3 net profit rises 30%
- RIL to invest Rs 3 lakh crore in Gujarat in next 10 years : Mukesh Ambani
Editor's Picks »
- 2nd Trump-Kim summit to take place at end of February
- To boost confidence in oil cut, OPEC issues quota list
- China said to offer path to end US trade imbalance
- BlackRock, Goldman said to move some fund managers to US if no-deal Brexit
- RBI governor Shaktikanta Das sees inflation assessment as a challenge
- What to expect from Q3 results of IndiGo, SpiceJet, Jet Airways
- Forget privatisation, govt has hugged its banks tighter
- Flat profit, rising debt are growing worries for Reliance
- Q3 results: HUL growth off a high base shows it’s on a roll
- DCB Bank Q3 results: Small loans give big pain as farm, mortgages lift delinquencies