RCom faces insolvency proceedings on Ericsson plea; Jio deal in jeopardy

RCom faces insolvency proceedings on Ericsson plea; Jio deal in jeopardy

On May 14, NCLT Mumbai admitted three insolvency petitions filed against RCom and its subsidiaries, Ericsson, which will now its plans of selling its telecom assets.

The Swedish firm had inked a seven-year deal in 2014 to operate and manage RCom's nationwide telecom network but has not been paid the bill.

While RCom's bank lenders had agreed to the debt reduction plan and had been seeking to quash Ericsson's bankruptcy petition on the grounds that it would result in a major loss for them, Ericsson has argued that it is not fair that lenders should be reimbursed for their losses while creditors are taken advantage of.

RCom shares closed down 8.2 per cent on Tuesday in a broader Mumbai market that ended largely unchanged.

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. On NSE, shares of the company slumped 15.72 per cent to close the day at Rs 10.45. The company said, "RCom and two of its subsidiaries - Reliance Telecom and Reliance Infratel - await A detailed order from NCLT, allowing the Ericsson application for admitting the companies to debt resolution under the IBC".

RCom can appeal the verdict with a tribunal in New Delhi.

However, Tuesday's order from the NCLT means that the asset sale would now be overseen by a court appointed administrator.

In the third quarter of the last financial year, RCom announced to exit from RBI's strategic debt restructuring framework after it signed definitive binding agreements for sale of wireless, spectrum (excluding 4G spectrum under sharing), tower and MCN assets. Besides the phone carrier, Ambani controls Reliance Power Ltd, Reliance Capital Ltd, Reliance Naval & Engineering Ltd, Reliance Infrastructure Ltd, Reliance Home Finance Ltd and Reliance Nippon Life Asset Management Ltd.

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