Deloitte: Telecom License Termination Will Kill the RCom Insolvency Plan

Deloitte, the resolution professional for RCom, on Thursday told the bankruptcy court in Mumbai that the telco’s insolvency process will collapse if the DoT terminates its licence due to unpaid dues.

Insolvency Process Moot without Telecom License

RCom's license expires on July 27 and DoT is sticking to its guns. As such, Deloitte has told the NCLT that it will leave nothing to sell. This is because if DoT cancels the licence, then RCom will have to surrender its most valued asset – spectrum. Therefore, the 53 lenders will get basically nothing in recovery.

Senior advocate Ravi Kadam has informed the court that without license, the entire corporate insolvency resolution process will fall apart. As such, a lawyer familiar with the matter told ET that the court has directed a notice for the matter to be sent to DoT. The court will next hear the case on 13th July.

Earlier this week, DoT rejected RCom's request to renew its telecom license. The telecom department cited its ₹26,000-crore AGR dues, saying that unless the telco pays up, it won't renew. This is the reason for RCom's urgent plea in the bankruptcy court. RCom has also informed the DoT that as per the IBC, its dues come under a moratorium. As such, DoT can't demand a payment right away.

RCom owns a pan-India telecom licence and also holds spectrum in the 850 MHz band in 14 telecom circles.

Spectrum - The Most Valuable RCom Asset

Since RCom holds substantial spectrum across the country, its CoC cleared a resolution plan in March 2020. Under this plan, UVARCL, an asset reconstruction firm, will buy its spectrum ₹12,760 crore, staggered over 12 years. The CoC expected a total recovery around ₹20,000-23,000 crores. Therefore, this spectrum sale represents more than half of the total recovery. Besides spectrum, the assets on sale include towers, fibre, enterprise business, data centres, and land.

DoT does not have a chance of recovering anything but a small fraction of the dues it claims. Lenders have calculated a total dues of ₹57,000 crores. However, DoT is an operational creditor, and will only receive less than a percent of its dues.

Besides, NCLT hasn't even cleared these plans yet. The only thing the tribunal has cleared thus far is the sale of Reliance Infratel's towers to Reliance Jio. That sale would generate ₹5,000 crore, though, nothing has materialized yet.

The precedent also goes against RCom. In a similar case, Aircel has knocked the door of the apex court after NCLAT said it can't sell spectrum before paying its AGR dues. Whether the tribunal will make an exception for RCom remains to be seen.