Tariff war with Jio, Rs 46,000 cr debt, pressure from lenders force RCom to go for bankruptcy
A major tariff war started by his brother Mukesh Ambani's Reliance Jio that led to the consolidation of four telcos, and RCom's inability to repay Rs 46,000 crore worth of debt has forced Anil Ambani's company to move the National Company Law Tribunal.
In 2018, RCom had averted three insolvency petitions filed by Swedish networking company Ericsson against it, citing strategic debt restructuring plan as per which it was supposed to sell assets worth over Rs 25,000 crore to Mukesh Ambani-led Reliance Jio.
A year later, it has failed cope with the overall pressure to reach a consensus on the asset sale with 40 of its lenders, its spectrum deal Mukesh Ambani's Reliance Jio Infocomm is stuck with the DoT, and it is yet to clear dues of companies like Ericsson.
Reliance Communications (RCom), like other telecom operators, had lost its market share to Mukesh Ambani's Reliance Jio ever since it was launched in 2016. While Reliance Jio's total mobile subscriber base has now reached 28 crores (December 2018 figure), RCom continued to lose subscribers.
On June 2, 2017, RCom initiated a debt resolution plan after the invocation of the strategic debt restructuring (SDR), but it failed to fructify. The SDR did not make any headway and the lenders "received zero proceeds from the proposed asset monetisation plans".
A major part of its restructuring plan included the sale of assets, including involving the sale of switching nodes, fibre, telecom towers, worth about Rs 25,000 crore to pay the money it owes to the banks, including IDBI Bank, Standard Chartered Bank, Union Bank, Canara Bank, and HSBC. The company could only sell nodes and fibre worth Rs 5,000 crore.
RCom also hoped to realise Rs 975 crore from the spectrum sale to Mukesh Ambani-led Reliance Jio, and real estate sale to Canada's Brookfield. Of this, the Supreme Court had asked it to repay Rs 550 crore to the dues of Ericson.
The company also promised to repay Rs 230 crore to settle dues of minority stakeholder in Reliance Infratel in December last year. Again, it failed to meet the deadline due to a delay in the approval from the Department of Telecom (DoT), following which the Swedish company filed its second contempt plea in the SC against Ambani and asked the court to stop him from leaving the country.
RCom also filed a contempt plea against the DoT for stalling the RCom-Jio spectrum deal. The DoT, on the other hand, refused to give its nod owing to RCom's non-payment of spectrum-related dues worth over Rs 2,947 crore to the government.
The Supreme Court even asked both Jio and RCom to decide about the payment of spectrum dues to the DoT, following which Reliance Jio declined to take oversee any past liability of RCom for which the Department of Telecom might raise demand in future.
With RCom planning to move the NCLT now, the spectrum deals with Reliance Jio and Brookfield stands cancelled.
RCom, in its stock exchange filing on Friday, explained that the step has been taken to pare its pilling debt of over Rs 46,000 crore through the asset sale. The embattled telecom firm has said it will implement the debt resolution plan through the NCLT framework, and the board has set 270 days deadline to complete the asset sale process.
"The board believes this course of action will be in the best interests of all stakeholders, ensuring comprehensive debt resolution in a final, transparent and time-bound manner within the prescribed 270 days," the company said.
Notably, under the insolvency process, the NCLT appoints resolution professionals to oversee the bidding for the sale of the assets of a bankrupt company, and resolve it within a specific time frame.
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