Reliance Communications likely to oppose Ericsson's insolvency bid

Rodiano Bonacci
Mag 17, 2018

The Mumbai bench of the National Company Law Tribunal on Tuesday admitted three petitions filed against the telco and its subsidiaries by Swedish telecom equipment maker Ericsson under the Insolvency and Bankruptcy Code.

The company's m-cap declined Rs 525.36 crore to Rs 2,917.64 crore.

RCom shares fell 15.20% to close at Rs 10.55 a share on Wednesday following the development.

Ericsson had signed a seven-year deal in 2014 to operate and manage RCom's nationwide telecom network but has not been paid the bill.

Like other incumbents in India's telecoms sector, RCom has been hit by a fierce price war over the previous year, especially after the entry of Reliance Jio, which offered free voice and cut-price data plans. Ericsson had filed the pleas to recover Rs 1,150 crore in dues.

The tribunal admitted the petition on May 15 which could potentially result in delaying RCom's plans to sell assets to lighten its debt load.

But the litigation is expected to prevent RCom from completing the $3.84 billion sale of the operator's wireless business to Reliance Jio Infocomm as part of its zero-write-off debt reduction plan.

A lawyer for RCom said it would appeal.

The decision means RCom will be placed under a court-appointed resolution professional, who will have as much as 270 days to work out a debt repayment plan or liquidate the firm.

With debt of Rs 45,733 crore ($6.7 billion) at the end of March 2017, RCom is the most-leveraged of all listed telecoms carriers in India.

Reacting to the ruling, the telecom major said in an exchange filing that it will study the detailed order before deciding on the next course of action.

The company shut down its consumer mobile business late a year ago unable to survive the aggressive pricing strategy adopted by Reliance Jio which offered free voice and undercut the prices of data plans.

Jio has tower, fibre and airwaves sharing pacts with RCom and could suffer some loss of competitiveness if a rival were to secure the beleaguered operators' assets.

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