NCLT allows Ericsson insolvency plea against RCom

Reliance Communications

After making a weak opening, the stock further tanked 20 per cent to Rs 9.95 on the BSE.

The Mumbai bench of the NCLT accepted a petition from the Indian unit of network-equipment maker Ericsson AB, which is seeking to recover Rs1,160 crore ($170 million) in unpaid dues from the telco controlled by Anil Ambani.

The National Company Law Tribunal on Tuesday ordered that wireless carrier Reliance Communications Ltd be placed in insolvency proceedings, jeopardising its proposed $3.7 billion asset sale to Reliance Jio Infocomm Ltd.

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. RCom shares have fallen over 65 per cent this year as of Tuesday's close, compared with Bharti Airtel's 27.9 per cent fall and Idea Cellular's 51 per cent drop during the same period.

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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. 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".

RCom owes around Rs 45,000 crore to as many as 31 domestic and worldwide banks, including over Rs 10,000 crore to a Chinese lender.

The company shut down its consumer mobile business late a year ago.

Run by wealthy businessman Anil Ambani, RCom has said it plans to reduce its debt by selling assets such as airwaves, mobile masts and fibre optic investments. However, the company refused to comment on the matter saying that its next move will be dictated after studying the court order carefully.

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