RCOM agrees settlement with Ericsson, clearing way for asset sale

31 May 2018

Reliance Communications (RCOM) has agreed a settlement with Ericsson, clearing the path for the operator to complete its long-delayed asset sale to repay lenders, the Economic Times reports. Under the settlement RCOM will pay the Swedish vendor INR5.5 billion (USD81.3 million), just over half of the amount Ericsson claims it was due from the operator (INR9.8 billion). The two companies presented the agreement to the National Company Law Appellate Tribunal (NCLAT) yesterday, following which the court halted insolvency proceedings and directed RCOM’s MD to file an undertaking in the next few days to make the payment by 30 September. If the payment has not been made by the time of the next hearing – 4 October – the sale of assets will be reversed and insolvency proceedings will begin again. In the interim, meanwhile, the NCLAT directed the Insolvency Resolution Professionals (IRPs) to return control of RCOM, its subsidiary Reliance Telecom and its tower infrastructure arm Reliance Infratel, to their management.

This settlement represents the last of the legal barriers to RCOM’s asset sale, after the telco inked a similar INR2.3 billion agreement with Infratel’s minority shareholders earlier this week. RCOM will now be able to proceed with its sale of spectrum rights and tower and fibre infrastructure to Reliance Jio Infocomm (Jio) for around INR250 billion, alongside a separate transaction for the transfer of real estate in New Delhi and Chennai, worth approximately INR8 billion, to Brookfield.