RCom, Ericsson agree on settlement; green signal for Reliance Jio deal

The NCLAT asked the Anil Ambani-controlled firm to pay Ericsson Rs 5.5 billion by the end of September

The National Company Law Appellate Tribunal (NCLAT) stayed the May 15 order of the National Company Law Tribunal (NCLT) in Mumbai, which had admitted Reliance Communications (RCom) and two of its subsidiaries for insolvency proceedings.

The NCLAT asked the Anil Ambani-controlled firm to pay Ericsson Rs 5.5 billion by the end of September.

With the stay on bankruptcy proceedings, RCom can now continue with its asset monetisation scheme involving the sale of towers, optic fibre cable network, spectrum and media convergence nodes to brother Mukesh Ambani-controlled Reliance JioInfocomm (Jio) for Rs 170 billion.

On Tuesday, NCLAT chairman Justice S J Mukhopadhaya asked the parties to settle the matter stating that the fate of operational creditors under the corporate resolution process was not ideal, especially if Ericsson wished to recover the majority of its dues.

NCLAT also asked RCom and Ericsson to file an affidavit by June 7 stating that the two companies will abide by the settlement.

Ericsson India, a subsidiary of the Swedish telecom equipment maker and service provider, had filed a case at NCLT, Mumbai last September seeking the liquidation of Reliance Communications (RCom), and its subsidiaries Reliance Infratel and Reliance Telecom, in order to recover Rs 11.5 billion.

The three companies were subsequently admitted under the Insolvency and Bankruptcy Code (IBC), and NCLT appointed a resolution professional (RP) to take over the management of each company. Ericsson had argued that it had entered into a seven-year agreement in 2014 with RCom and its subsidiaries for maintaining, upgrading and developing the latter's telecommunications infrastructure, which was not honoured.

RCom and its subsidiaries owed Ericsson around Rs 9.78 billion for their services which, Ericsson's counsel told the NCLT, had increased to around Rs 16 billion given that there were delays in the payment, despite several notices being issued to the Anil Ambani controlled companies.

RCom filed its appeal with the NCLAT, and was awarded with a stay on the order admitting the three firms under the IBC.

RCom and its subsidiaries now have the permission to go ahead with the debt restructuring plan that was prepared in December 2017. There were fears of the three Reliance group companies undergoing insolvency proceedings, which would have meant that the asset monetisation scheme under the plan would not be allowed.

IUC report: Reliance Jio alleges Rs 100,000 cr bonanza to incumbents

Says bonanza due to IUC suggestions not being carried out by Trai

Stepping up its attack on incumbents, Reliance Jio has alleged that three major operators benefitted by over Rs 100,000 crore in the past five years owing to non-implementation of the telecom regulator’s 2011 recommendations on interconnect usage charges (IUC), or terminating charges.

In an affidavit to the Supreme Court in 2011, the Telecom Regulatory Authority of India (Trai) had recommended that the IUC charges be cut to half from 20 paisa and gradually shifted to the ‘bill and keep’ model — which means zero charge — by 2014. But in 2015, the IUC was only brought down to 14 paisa with the mandate that it would be revised after two years.

Company Business News : The additional money that the big three incumbents have made, according to Jio’s allegations, is based on the net present value (which includes interest income) and reflects the excess recovery made by them over the actual cost that they have to incur for terminating a call. The presentation was given by Jio to the Trai on Tuesday.

Jio also said that India was moving against the global trend of reducing IUC. It said that IUC as a percentage of blended retail mobile price is currently 1 per cent in China, 9 per cent in UK, 11 per cent in France, and 13 per cent in Japan. But in India, IUC, which constituted only 10 per cent of the average tariff in 2003, has now climbed up to 45 per cent.

Jio argued that the value of surplus recovery for the three incumbents was to the tune of Rs 20,624 crore in the financial year ended 2017.

Making a strong case for shifting to the bill and keep model, Jio stated that the cost of delivering voice on an IP network was practically nil and it seemed that new operators were merely subsidising the incumbents because of their ineffeciencies and older networks. Read more full article