1. Ericsson takes action against Reliance Communications; may endanger massive Aircel deal

Ericsson takes action against Reliance Communications; may endanger massive Aircel deal

Ericsson India on Wednesday filed insolvency petitions against Reliance Communications (RCom), Reliance Infratel and Reliance Telecom, all promoted by Anil Ambani. Ericsson is an operational creditor to RCom, which together with its subsidiaries owes the telecom equipment vendor Rs 1,156 crore.

By: | Mumbai | Updated: September 14, 2017 7:03 AM
ericsson, reliance, reliance jio, mukesh ambani Should the insolvency petitions be admitted by the National Company Law Tribunal (NCLT), they could come in the way of RCom’s proposed merger with Aircel, derailing the former’s plans to pare debt by about 60%. (Reuters)

Ericsson India on Wednesday filed insolvency petitions against Reliance Communications (RCom), Reliance Infratel and Reliance Telecom, all promoted by Anil Ambani. Ericsson is an operational creditor to RCom, which together with its subsidiaries owes the telecom equipment vendor Rs 1,156 crore.

Should the insolvency petitions be admitted by the National Company Law Tribunal (NCLT), they could come in the way of RCom’s proposed merger with Aircel, derailing the former’s plans to pare debt by about 60%.

The Swedish multinational had earlier objected to the merger, seeking a creditors’ meeting. However, the Mumbai bench of the NCLT had admitted the merger petition in August and will hear it on October 11. Senior bankers said some lenders were yet to approve the merger. RCom said in a regulatory filing on Wednesday that it “intends to challenge the said petitions”.

Apart from Ericsson, others who objected to RCom’s merger plans included Chennai Network Infrastructure — a GTL subsidiary — and Bharti Infratel. The department of telecommunications had observed the merger needed to be first cleared by the Supreme Court; the apex court is hearing a case against Aircel’s Malaysian promoters in an alleged corruption case.

While China Development Bank, Standard Chartered Bank and HSBC Daisy Investments had initially objected the merger petitions, they later consented to the merger proposal being admitted subject to certain conditions. RCom owes the Chinese lender close to Rs 9,000 crore. The telco’s gross debt stood at Rs 45,000 crore in FY17, of which the company owes domestic lenders Rs 25,000 crore.

RCom plans to repay Rs 11,000 crore of its `45,000-crore debt from the proceeds of the sale of a majority stake in its tower business to Brookfield Infrastructure. Another Rs 14,000 crore debt will move from RCom’s books to the joint venture with Aircel.

Sources added RCom plans to service the yearly interest payments of around Rs 1,500 crore on the remaining debt from an expected revenue of Rs 8,000 crore after the merger and the sale. The telco received the approval for the merger from the Securities and Exchange Board of India and is awaiting a nod from the NCLT. According to the merger terms, both RCom and Aircel’s controlling firm Maxis Communications will hold an equal stake of 50% each in the merged entity.

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