Connect with us

Daily News

Furnish Bank Guarantees or Lose Licences: DoT to RCom

The department of telecommunications (DoT) has told Reliance Communications NSE 1.17 % (RCom) its licences will be cancelled unless it pays `774 crore in bank guarantees towards upcoming spectrum payment dues, effectively threatening the telco’s deal to sell its airwaves to Reliance Jio Infocomm. The Anil Ambaniowned company, in a desperate rush to sell its wireless assets to Jio for over Rs 18,000 crore to pare its Rs 46,000-crore debt, has agreed to furnish the bank guarantee in four weeks, or by end of July, two persons familiar with the matter told ET. DoT’s showcause notice to RCom was sent in the last week of June.

In its response, RCom pointed out that the department held bank guarantees worth Rs 2,540 crore which the Telecom Dispute Settlement and Appellate Tribunal (TDSAT) directed the DoT to return to the company.

DoT, however, has stood its ground for the fresh bank guarantee, with officials saying the department intends to appeal the TDSAT ruling in the Supreme Court.

“The notice was received and replied to earlier this month. The amount of `774 crore will be given in bank guarantees, but DoT also has to return the bank guarantees with them as ordered by TDSAT,” said one of the persons aware of the developments.

In its reply, RCom pointed out that the bank guarantees were not interest-bearing and the delay in paying up was not causing any loss to DoT, the person said. But it wasn’t immediately clear from where RCom would arrange the funds, since it has been unable to repay thousands of crores owed to financial and operational creditors and is banking on asset sales for that. Once India’s second-largest telco, the company was unable to cope with brutal competition and forced to shut its wireless business at the end of 2017 amid rising debt, plunging revenue and widening losses. If the company doesn’t furnish the bank guarantees in time, the DoT is unlikely to approve of the company’s spectrum sale, delaying the deal with Jio.

And if the licences are cancelled—as the DoT has threatened to do citing breach of licence conditions—then the spectrum would be taken over by the department, rendering the RCom-Jio deal meaningless. The companies would need to then move court, in which  case the whole deal would get delayed till a favourable order comes in.

RCom declined to comment on the matter as of Sunday evening. Late December RCom unveiled an over Rs 18,000-crore deal to sell most of its wireless assets—including 122 MHz of spectrum, the fibre network, telecom towers and nodes—to Jio. Besides, Canada’s Brookfield will purchase the company’s real estate in New Delhi and Chennai for about Rs 800 crore. Jio is also expected to take on deferred spectrum liabilities—to be paid to the government— and other dues of about Rs 8,000 crore.

The funds are to be used to repay its 39 financial lenders. The deal, which was initially expected to close by March, ran into legal challenges, which have been cleared now. RCom expects it to now close in the July-September quarter. One of the sources quoted said that save a couple of major banks, the rest of the 39 banks that are financial creditors to RCom have given a no-objection certificate to the deal, and the rest would come through in a week’s time.

Earlier this month, the TDSAT had directed DoT to release Rs 2,000 crore worth of bank guarantees that RCom had provided in 2016 to secure the payment of spectrum-related charges. The company had approached the tribunal contesting the demand for bank guarantees for one-time spectrum charges (OTSC) due towards payment of market-linked prices for excess spectrum held by a telco, which DoT raised in late 2015. – The Economic Times

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Copyright © 2024 Communications Today

error: Content is protected !!