India’s Department of Telecommunications (DoT) has rejected the planned sale of spectrum rights by Reliance Communications (RCOM) to Reliance Jio Infocomm (Jio) after the latter requested reassurances that it would not be held liable for spectrum dues, the Economic Times reports. The transaction was negotiated in late 2017 and is central to RCOM’s plan to pay dues of INR5.5 billion (USD77.8 million) to equipment manufacturer Ericsson. However, legal difficulties and disagreements with the DoT have delayed the sale, resulting in RCOM missing several deadlines for its payment to the Swedish vendor, the final deadline for which had been set at 15 December 2018 with the threat of insolvency proceedings in case of non-payment.
The main sticking point for the DoT has been the submission of bank guarantees to cover the spectrum usage charge (SUC) of INR29.5 billion, with cash-strapped RCOM unable to provide guarantees for that amount. The DoT was instructed last week by the Supreme Court to accept a corporate guarantee of INR14 billion along with real estate assets from an RCOM subsidiary in lieu of the bank guarantee. DoT accepted the ruling, but said paperwork had prevented it from complying with the order prior to RCOM’s 15 December deadline. On Friday (14 December), though, Jio had submitted a letter to the DoT seeking assurances that it would not be held liable for RCOM’s past dues related to spectrum. The current regulations for spectrum trading stipulate that the buyer is, indeed, liable for dues that had not been recovered from the seller and as such, the DoT said it could not approve the transaction with the conditions stipulated by Jio. A senior DoT official was quoted as saying: ‘The trading rules clearly say DoT can ask both the operators or any one of them to pay the dues. Since Jio has imposed conditions, we cannot accept it [the deal] as it goes against the guidelines. Now the ball is in their court. They have to decide and come back to us. Till then, this deal is off the table’.