Call waiting! Reliance Jio-RCom spectrum deal on hold

With Reliance Jio on Wednesday sticking to its stand that it would not take the responsibility for past spectrum-related dues of Reliance Communications (RCom), the fate of the Rs 25,000-crore spectrum trading transaction between the two hangs in balance.

As a result, the department of telecommunications (DoT) has withheld the no objection certificate (NoC) it had undertaken to provide by December 17.

On Wednesday, senior executives of RCom and RJio met DoT secretary Aruna Sundararajan and other senior officials, but sources said that no solution had been arrived as yet. They added that DoT officials asked the two companies to decide who would bear the liability for past spectrum dues and provide an undertaking. Subsequently, the department would clear the deal.

Both RCom and Jio did not respond to queries sent by FE till the time of going to the press.

However, RCom has time to find a solution to the issue as the National Company Law Appellate Tribunal (NCLAT) on Wednesday while taking up the insolvency matter filed against RCom by its vendor, Ericsson, posted the matter for further hearing on January 22.

RCom’s counsel told the appellate tribunal that the Supreme Court has directed the DoT to provide the NoC.

RCom was required to pay the dues of Rs 550 crore to Ericsson by December 15 failing which the insolvency proceedings were to restart. Also, Ericsson could approach the SC initiating contempt proceedings against RCom. However, since the court is on vacation, the company has got a breather.

On December 14, the DoT told the SC it would give its nod to RCom’s spectrum trading deal with Jio by December 17. The DoT had said that RCom had provided a corporate guarantee of Rs 1,400 crore by its subsidiary firm, Reliance Realty and also a plot of land against spectrum-related dues worth Rs 2,947 crore, and it was conducting its due diligence on them.

The SC had directed the DoT to grant the NoC on the condition that Reliance Realty will not redeem the preferential shares without the DoT’s nod.

However, a letter from Jio put a spanner in the deal. Jio informed the DoT that it should not be held liable for RCom’s past dues related to spectrum issues.

Jio’s letter to DoT was written in the context of the spectrum trading rules which stipulate that at any point if any past liabilities come to light it will be recovered from the buyer of spectrum if the seller is unable to pay them.

With Jio not willing to take the responsibility of paying any past liabilities, RCom would need to take up the responsibility and give an undertaking to the DoT to this effect. Apart from the spectrum dues for which RCom has given a corporate guarantee there are other cases related to the company as well as other industry players, like disputed adjusted gross revenue and one-time spectrum charges, which are currently sub-judice.

DoT’s nod to RCom’s spectrum trading deal is crucial for its asset monetisation programme under which it is selling its assets like spectrum, telecom towers, optical fibre, to Jio. This will bring down the company’s overall debt of Rs 45,000 crore by 25,000 crore.

The Rs 25,000 crore which Rcom will receive from Jio includes around Rs 18,000 crore in cash and another Rs 7,000 crore towards deferred spectrum liabilities, which will get transferred to Reliance Jio, as the new owner of the spectrum.