Won't Renew License Until RCom Clears Dues: DoT

On Tuesday, the DoT refused to renew the telecom licence of Reliance Communications, or RCom. The telecom department said that it won't renew licence until RCom clears it ₹26,000 crore statutory dues.

However, this would not solve DoT's problem; if the telco fails to get a renewal, it will have to surrender its spectrum. That spectrum it holds is arguably its most valuable asset; without its spectrum, there is no hope of making anything significant for DoT.

DoT Refuses RCom's Request for Renewal

An official aware of the developments said, "DoT has informed RCom that it cannot renew telecom licences unless previous spectrum related dues are cleared. This followed the resolution professional’s (RP) communication to the department that as per Insolvency and Bankruptcy Code, its dues come under a moratorium and it does not have to pay them".

Last month, RCom had written to the DoT, requesting DoT to renew its spectrum for another 20 years. The bankrupt telco holds a telecom licence and owns spectrum in the 850 MHz band in 14 telecom circles. However, the permits that it has expire in July.

Right now, RCom's RP, Deloitte, is running the telco, previously owned by Anil Ambani. This is a part of its insolvency process, as the telco went bankrupt with ₹46,000 crore of debt.

A person aware of the correspondence between the two parties said, "at this rate, the lenders will not recover any value from the spectrum because of the legal battles". Incidentally, the NCLAT, in a similar but separate case, barred Aircel, another bankrupt telco, from selling its spectrum unless it clears DoT's dues. Aircel's creditors and UVARCL, its assets buyer, has challenged this ruling in the Supreme Court.

DoT can only hope to recover even a small percentage of its dues by renewing RCom's license. That is the only way RCom can sell its spectrum and DoT can recover something. If DoT does not renew, then RCom will lose its right to use and won't be able to sell spectrum. And if it can’t sell spectrum, its resolution process will fall apart.

It is an impasse for DoT, who either way will be drawing the short stick.

Deloitte May Move TDSAT Against DoT Move

An official aware of the matter said that the RP may move the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) against the DoT decision. The telco now runs its enterprise business, after it shut down its mobile business in 2017. It hasn’t paid any of its ₹26,000 crore AGR dues demanded by the DoT, citing ongoing bankruptcy proceedings.

In March 2020, RCom's committee of creditors cleared a resolution plan under the IBC proceedings. Under the plan, UVARCL will pick up its spectrum for ₹12,760 crore, staggered over 12 years, with ₹5 crore of upfront cash payment.

This is why holding onto its spectrum is so important for RCom; that is a big chunk of the ₹20,000-23,000 crore expected from the sale of assets in RCom and its two units – Reliance Telecom and Reliance Infratel.

Besides spectrum, RCom is selling its towers, fiber, enterprise business, data centers and land.

However, DoT won't even recover a fraction of its claimed dues. The telecom department remains an operational creditor. Under the plan, operational creditors will get a total ₹672 crore for RCom and ₹88 crore for Reliance Telecom. However, there are hundreds of such operational creditors.

However, the National Company Law Tribunal, or NCLT, has not cleared these plans yet. It has only cleared the sale of towers under Reliance Infratel to a Reliance Jio unit for nearly ₹5,000 crore.