Anil Ambani’s RCom secures extension on crucial debt payment, avoiding bankruptcy and keeping hopes of a bailout alive
- The Supreme Court has given
Reliance Communicationsone last chance to clear ₹5.5 billion worth of dues to Ericsson, a Swedish telecom equipment maker.
- The judgment is a welcome one for
Anil Ambani’s cash-strapped firm, which is counting on the sale of fibre and spectrum assets to Mukesh Ambani’s Reliance Jioto go through in order to pay its debts.
- If RCom is unable to complete the payment to Ericsson by the new deadline of 15 December, it will be referred to the
National Company Law Tribunalfor insolvency proceedings.
India’s Supreme Court has granted a reprieve to Anil Ambani’s Reliance Communications (RCom), giving the company until Dec. 15 to clear its dues to Swedish telecom equipment maker Ericsson.
The decision came on Oct. 23, with the three-judge bench saying that this would be the cash-strapped conglomerate’s last chance to settle its outstanding dues, which carry an additional interest charge of 12%.
The judgment is a welcome one for RCom owner Anil Ambani. After defaulting on a payment of ₹5.5 billion to Ericsson on 30 September, things have been looking bleak for RCom — which has overall debts of ₹460 billion. Not only was it dealing with the potential commencement of bankruptcy proceedings but a crucial sale of telecom assets to brother Mukesh Ambani’s Reliance Jio seemed unlikely.
RCom has been counting on the deal with Jio to go through in order for it to pay back Ericsson. However, India’s Department of Telecommunications (DoT) blocked the deal, which involved the sale of spectrum, for the very reason RCom had negotiated it in the first place: because it had outstanding debts to clear. Further, the DoT refused to accept land as a collateral in lieu of the payments to RCom’s creditors.
After RCom defaulted on the payment to Ericsson, the Swedish company was forced to take the matter to the Supreme Court. As part of its plea, RCom asked for an additional 60 days to complete the payment.
RCom entered into a seven-year partnership with Ericsson in December 2014 to outsource the management of its national telecom network. The arrangement, which was estimated to involve $1 billion worth of business for Ericsson, ended soon after RCom was forced to exit the telecom industry last following the 2016 entry of Jio — the very company that is offering to buy its assets at a favorable price.
If RCom is unable to complete the payment to Ericsson by the new deadline, it will be referred to the National Company Law Tribunal for insolvency. It is unclear at the moment where Anil Ambani will get the cash to complete the payment from.
In the event that the DoT refuses to budge, RCom will probably lobby Jio for an advance payment — which is in the latter’s interest as well because the fate of the spectrum deal hangs in the balance.
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