Ericsson wins plea to push Anil Ambani’s RCom into insolvency

Bloomberg

An Indian tribunal ordered billionaire Anil Ambani’s Reliance Communications Ltd. be placed under insolvency proceedings, jeopardising the phone company’s proposed $3.7 billion asset sale to Reliance Jio Infocomm Ltd.
The Mumbai bench of the National Company Law Tribunal on Tuesday accepted a petition from the Indian unit of network-equipment maker Ericsson AB, which is seeking to recover 11.6 billion rupees ($170 million) in unpaid dues. RCom, as the company is known, can appeal the verdict with a tribunal in New Delhi. The company and two of its subsidiaries will decide on the next course of action after studying the detailed order, RCom said in an exchange filing.
The court order sets back RCom’s planned sale of airwaves, towers and fiber assets to Reliance Jio, the phone company owned by Ambani’s older brother, India’s richest man. The decision on RCom, which is seeking to reduce its $7 billion in debts, comes after Aircel Ltd. filed for court protection from creditors in February as a bruising tariff war eroded earnings.
The decision means indebted RCom will be placed under a court-appointed resolution professional who will have as long as 270 days to work out a debt repayment plan or liquidate the firm. The latter scenario would result in what could be one of India’s biggest bankruptcies and conclude the downfall of what was once the country’s second-largest phone operator.
A two-member panel headed by Justice B.S.V. Prakash Kumar said that an insolvency-resolution professional will be decided on in a day or two.
If the company is sold under the insolvency process, Jio might have to clear a legal hurdle to bid for RCom. Recently implemented bankruptcy rules bar takeovers of stressed assets by entities related to the defaulting promoters. The rule is aimed at blocking back-door entry by delinquent owners. Jio has tower, fibre and airwaves sharing pacts with RCom and could suffer some loss of competitiveness if a rival were to secure the beleaguered operators’ assets.
The bailout deal with Reliance Jio, announced in late December, had triggered a record rally in RCom shares. The stock has crashed nearly 66 percent this year amid a bevy of lawsuits, including one by a unit of HSBC Holdings Plc.
The company’s woes have been building for years as it delivered declining profits for six out of seven years, before posting its first annual loss in the year that ended March 2017. Earnings for the year to March 2018 will be announced on May 19.
Like other carriers, RCom struggled as India’s phone market became overcrowded — there were a dozen operators in the country as of last year, versus three in China. Those pressures became particularly acute after Reliance Jio launched in September of 2016 with free services. RCom is the second-largest listed company by assets in Anil Ambani’s business empire.