The telecom department told Reliance CommunicationsNSE -5.40 % (RCom) and Reliance Jio Infocomm on Tuesday that it can’t approve their deal to trade airwaves as it does not conform to its guidelines, dealing a big blow to the Anil Ambani-owned telco’s efforts to repay creditors and avoid insolvency proceedings.
The dramatic development follows Jio’s letter to the department of telecommunications (DoT), written on Friday, where it sought assurance from the government that it won’t be held liable for RCom’s past dues related to airwaves. This is not in accordance with the government’s spectrum trading norms, which stipulate the buyer is liable for dues that haven’t been recovered from the seller.
“The trading rules clearly say DoT can ask both the operators or any one of them to pay the dues. Since Jio has imposed conditions, we cannot accept it (the deal) as it goes against the guidelines,” said a senior DoT official.
“Now the ball is in their court. They have to decide and come back to us. Till then, this deal is off the table,” the official added.
Both RCom and Jio did not respond to ET’s queries. RCom shares closed at Rs 15.78, up 0.77%, on the BSE on Tuesday. The rejection of the spectrum trading deal will constitute a setback to RCom’s efforts to settle with Ericsson. The deal was supposed to fund RCom’s Rs 550-crore plus payment to the Swedish telecom equipment maker.
RCom has already missed the Supreme Court-mandated December 15 deadline for payment to Ericsson. It now faces the prospect of being dragged back into insolvency proceedings, besides a revival of a contempt of court petition against its chairman Anil Ambani, who had stood guarantee for timely payment to Ericsson.
The Supreme Court had directed DoT to approve the spectrum trading pact and accept a Rs 1,400 crore corporate guarantee, instead of a bank guarantee, as well as a parcel of land from a RCom subsidiary to cover the spectrum user charge (SUC) claim of Rs 2,947 crore, which the Anil Ambani-owned company is currently disputing.
The telecom department was of the view that in case there is any issue with the corporate guarantee or land parcel, Jio — being the buyer — would have to step in and make the payments. But Jio has disowned any such liability.
JIO submitted trading pact
In the letter, the company has said the spectrum trading agreement — which would have seen RCom sell 122.4 MHz of airwaves to Jio — stipulates that the company owned by Mukesh’s younger brother Anil would provide bank guarantees to the telecom department for all disputed claims.
Sources said Jio had even submitted the trading agreement between the two telcos, which states that RCom will provide bank guarantees to DoT against its spectrum dues.
RCom’s spectrum sale agreement with Jio was struck in late 2017 and was central to its plan to pare its Rs 46,000-crore debt by Rs 18,000 crore.
The tussle with DoT started when the department demanded spectrum dues worth Rs 2,947.68 crore as a pre-condition for approving the deal, which was opposed by RCom. After various twists and turns, the Supreme Court directed DoT to accept the corporate guarantee from Reliance Realty, a unit of RCom, as surety for the disputed amount and give its approval to the deal.
Source: Economic Times