Bankruptcy jeopardises RCom's US$3.7b deal; shares plummet

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On BSE, the stock spurted to Rs 15.65.

The Mumbai bench of the National Company Law Tribunal on Tuesday accepted a petition from the Indian unit of network equipment maker Ericsson AB, which is seeking to recover 11.6 billion rupees (S$229 million) in unpaid dues from the telecommunications company controlled by billionaire Anil Ambani. The latter scenario would result in what could be one of India's biggest bankruptcies and conclude the downfall of what was once the country's second-largest phone operator. 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.

This has prevented the company from closing sale of its telecom tower business to Anil Ambani's elder brother-run Reliance Industries for over Rs 23,000 crore, apart from monetising other assets including selling its sprawling DAKC premises to the Chinese lender and pares debt.

Shares of Reliance Communications (RCcom) tumbled 20.5 percent a day after NCLT admitted an insolvency petition filed by Ericsson against the company and two of its subsidiaries.

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The Swedish firm had inked a seven-year deal in 2014 to operate and manage RCom's nationwide telecom network but has not been paid the bill. The company and two of its subsidiaries will decide on the next course of action after studying the detailed order, RCom said in an exchange filing. RCom says it owes only Rs 60 crore to Ericsson.

A lawyer for RCom said it would appeal.

On Wednesday, HSBC Daisy Investment petition opposing the sale of the tower assets of Reliance Infratel the tower subsidiary of RCom came up for hearing in the Supreme Court but was adjourned for May 17.

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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