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 telecom's network, is seeking 11.55 billion rupees ($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 the 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 the bankruptcy law, insolvency resolution needs to be completed within a maximum 9 months, failing which the company is liquidated.
With debt of 457.33 billion rupees ($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 percent on Tuesday in a broader Mumbai market that ended largely unchanged. The company is set to report earning for the quarter ended March on May 19.
Updated Date: May 16, 2018 08:30 AM