NCLT allows Ericsson insolvency plea against RCom

Federico Mansilla
May 17, 2018

The company's m-cap declined Rs 525.36 crore to Rs 2,917.64 crore.

Ericsson, which signed a seven-year deal in 2014 to operate and manage Reliance Communications' nationwide telecoms network, is seeking Rs 1,155 crore ($170 million) from the company and two of its subsidiaries.

The stock fell sharply by 15.26 per cent to end at Rs 10.55 on BSE.

Like other incumbents in India's telecoms sector, RCom has been hit by a fierce price war over the a year ago, especially after the entry of Reliance Jio, which offered free voice and cut-price data plans.

Last September, the Swedish firm had filed a petition in the NCLT's Mumbai bench seeking liquidation of the telecom operator to recover Rs 1,150 crore that Reliance Communications owes it.

The tribunal admitted the petition, which could result in delaying RCom's plans to sell assets to lighten its debt load. 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".

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Jio has tower, fibre and airwaves sharing pacts with RCom and could suffer some loss of competitiveness if a rival were to secure the beleaguered operators' assets.

SHARES and bonds of Reliance Communications Ltd tumbled after an Indian tribunal ordered that the wireless carrier be placed in insolvency proceedings, jeopardising its proposed US$3.7 billion asset sale to Reliance Jio Infocomm Ltd.

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

According to the report, Ericsson will now be asked to suggest the name of an interim resolution professional that will seek to settle the dispute. RCom says it owes only Rs 60 crore to Ericsson.

The company shut down its consumer mobile business late past year unable to survive the aggressive pricing strategy adopted by Reliance Jio which offered free voice and undercut the prices of data plans.

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