RCom in Talks with Ericsson to Resolve Bankruptcy Proceedings

RCom in Talks with Ericsson to Resolve Bankruptcy Proceedings

After being hit with bankruptcy proceedings following a request by Ericsson, RCom (Reliance Communications) is now attempting to settle its $150 million debt to the Swedish vendor outside of court.

Last week, India’s National Company Law Tribunal (NCLT) upheld Ericsson’s request to initiate bankruptcy proceedings against RCom due to the debt. The ruling casts doubt over RCom’s plan to sell off the bulk of its wireless assets to Reliance Jio, which was cleared by the Indian Supreme Court last month.

RCom was hoping to raise $3.8 billion via the sale, although the bankruptcy proceedings may disrupt this. India introduced a new insolvency code in 2016 that could see Jio obliged to lodge a new bid if rival operators express interest in bidding for the assets.

The insolvency code stipulates a nine month deadline for resolving disputes, with defaulting companies being liquidated if the case is not resolved within this timeframe. The code’s strict regulations are intended to ensure that larger businesses feel the full force of the law.

With debts of around $6.9 billion, RCom announced in December 2017 that it planned to cease functions as a mobile operator in India. However, its exit was stalled by Ericsson’s claim that RCom had failed to pay the Swedish vendor for outsourced management services.

A statement from RCom said: “We confirm that RCOM and Ericsson are at an advanced stage of discussions to expeditiously resolve commercial issues. This will enable Reliance Communications to exit the NCLT process. RCom is confident to expeditiously proceed with its monetisation plan with Reliance Jio and overall Resolution Plan with the lenders, keeping in mind the interests of all stakeholders.”

However, the talks may not prove fruitful; reaching an agreement would necessitate RCom depositing the amount owing, followed by Ericsson withdrawing its request. It is currently unclear if RCom would be able to repay this amount, indicating that the operator will likely be sold or liquidated within nine months.

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