RCOM faces disruption from Ericsson petition; drives migration to 4G in Gujarat

14 Sep 2017

Swedish vendor Ericsson has filed an insolvency petition with the National Company Law Tribunal (NCLT) against wireless provider Reliance Communications (RCOM) and two of its subsidiaries – Reliance Infratel and Reliance Telecom – regarding unpaid dues of INR11.5 billion (USD179 million), potentially disrupting the cellco’s planned merger with Aircel. The Economic Times quotes Ericsson as saying that the move was a ‘last resort … to resolve an issue regarding debt that Reliance owes to Ericsson for services provided under a contract.’ RCOM is currently undergoing strategic debt restructuring (SDR) and, as part of that process, the cellco was granted a ‘standstill’ until December, during which it will not have to service debts and its loans will not accrue interest. The reprieve is intended to allow RCOM to complete its merger with Aircel and the sale of its towers to Brookfield Infrastructure Partners, with the two deals expected to reduce RCOM’s debt from around INR450 billion down to roughly INR200 billion.

A number of RCOM’s creditors have opposed the planned Aircel merger, demanding that their dues be cleared first. The NCLT is scheduled to hear arguments on the Ercisson case on 26 September, but a spokesperson for RCOM’s legal team stated that the firm is in talks to settle the matter out of court before that date.

In a related development, RCOM has started to encourage its GSM subscribers in Gujarat to migrate to 4G, as its 2G licence is due to expire at the end of the September.

India, Aircel, Ericsson, Reliance Communications (RCOM)