The Supreme Court allowed Reliance Communications to sell its spectrum to Reliance JioInfocomm, rejecting the telecom department’s objections and providing huge relief to the telco, which will now be able to complete the transaction and pare debt by repaying creditors.
A bench headed by Justice Rohinton F Nariman directed RCom’s unit, Reliance Realty, to furnish a corporate guarantee of ₹1,400 crore to the Department of Telecommunications in the next two days. It directed DoT to approve the spectrum deal within seven days of receiving the corporate guarantee.
RCom had closed its wireless business in 2017, weighed by debt of ₹46,000 crore, falling revenue and widening losses. The company has been locked in a legal tussle with DoT over spectrum-related dues worth ₹2,947.68 crore.
RCom Shares Surge
The government refused to clear the spectrum sale until its dues were covered by bank guarantees and it had challenged a pledge of land to cover the amount. “The spectrum trading transaction will now be completed. RCom will pay off Ericsson and minority investors of Reliance Infratel Ltd,” the company said in a stock exchange filing.
RCom shares surged 11.9% to close at ₹14.27 on the BSE on Friday.
“…Supreme Court today ordered the Department of Telecommunications… to grant a no-objection to Reliance Communications for spectrum trading within seven days. RCom’s 100% subsidiary, Reliance Realty, will submit a corporate guarantee of ₹1,400 crore within two days,” the Anil Ambani-owned company’s statement said. “RCom’s asset monetisation programme proceeds as per plans.”
RCom has been banking on sale of assets to repay Ericsson and Reliance Infratel shareholders, besides 39 lenders, including 14 state run banks led by State Bank of India. The Supreme Court had set a December 15 deadline for RCom to pay ₹975 crore to Ericsson (₹550 crore plus interest) and Reliance Infratel’s minority shareholders, including HSBC Daisy Investments.
MONETISATION PLAN
RCom expects to get ₹18,000 crore from sale of spectrum, telecom towers, switching nodes and fibre assets to Jio and some real estate to Canadian asset management firm Brookfield. The company has completed sale of fibre assets and switching nodes for ₹5,000 crore, while the rest are pending.
RCom wireless assets that will eventually go to Jio include 122.4 units of 4G airwaves across the 850, 900, 1800 and 2100 MHz bands and over 43,000 telecom towers housed under Reliance Infratel.
The apex court had upheld an earlier verdict of the telecom tribunal in October that no bank guarantees were needed for DoT to approve the RCom-Jio spectrum deal. The Telecom Disputes Settlement and Appellate Tribunal had instead asked RCom to pledge land worth ₹1,400 crore to cover for DoT’s dues, which the government had challenged.
“This is a huge relief and DoT ought to have implemented the earlier TDSAT order and granted permission to trade in spectrum. This would have been in line with the government’s vision of ease of doing business,” said advocate Mahesh Agarwal, who assisted senior counsels Kapil Sibal and Mukul Rohatgi – also ex-attorney general – in representing RCom.
Additional solicitor general PS Narasimha appeared for DoT.
“Transfer has been unnecessarily delayed, causing corresponding delays to banks in recovering their money,” said Agarwal.
The deal with Mukesh Ambani owned Jio, which was signed a year ago, is expected to be completed in the next10 days, people aware of the matter said.
RCom will now furnish the corporate guarantee along with pledge of Navi Mumbai land. “RCom’s lawyers told the SC that they desperately needed to get the no-objection certificate and realising that the other side was hesitant, offered the corporate guarantee in addition to the land parcel that was provided as security earlier,” said one of the people.
Source: Economic Times