Reliance Communications likely to oppose Ericsson's insolvency bid

Considering that NCLT did not agree to keep the insolvency plea in abeyance it also puts in question its deal with Reliance Jio

Reliance Communications likely to oppose Ericsson's insolvency bid

The stock fell up to 20.08% in trade today and hit an intra day low of 9.95 level on BSE.

Ericsson had signed a seven-year deal in 2014 to operate and manage RCom's nationwide telecom network but has allegedly not been paid.

Shares of Reliance Communications plunged almost 16 per cent a day after NCLT admitted an insolvency petition filed by Ericsson against the company and two of its subsidiaries.

While RCom's bank lenders had agreed to the debt reduction plan and had been seeking to quash Ericsson's bankruptcy petition on the grounds that it would result in a major loss for them, Ericsson has argued that it is not fair that lenders should be reimbursed for their losses while creditors are taken advantage of.

Last September, the Swedish company had filed a petition in the NCLT's Mumbai bench seeking liquidation of the telecom operator to recover Rs 1,150 crore that RCom owes it. Last year, courtroom battles were one of the main reasons its merger deal with Aircel and the tower sale to Brookfield did not go through.

Meanwhile, RCom clarified after market hours yesterday, 15 May 2018, that the company and two of its subsidiaries Reliance Telecom and Reliance Infratel, await the detailed orders of the National Company Law Tribunal (NCLT), Mumbai, allowing the Ericsson application for admitting the companies to debt resolution under IBC.

Under the resolution plan worked out with the domestic lenders the company was to sell of most of its wireless assets to Reliance Jio, controlled by Anil Ambani's elder brother Mukesh Ambani for an undisclosed value.

RCom's debt stands at Rs 46,000 crore. The tribunal's ruling is likely to jeopardise the company's deal with Reliance Jio Infocomm, which will nearly halve its debt.

With debt of Rs 45,733 crore ($6.7 billion) at the end of March 2017, RCom is the most-leveraged of all listed telecoms carriers in India. Due to mounting losses, the company began to wind down its mobile operations from last November.

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