Banks to share proceeds of RCom debt resolution, DoT to get nothing for spectrum
24 August 2020
Creditor banks will share the total proceeds of Rs23,000 crore from Reliance Communication debt resolution with the Committee of Creditors (CoC) deciding not to give anything to DoT as the department is by definition an operational creditor.
Chinese banks, on the other hand, may walk away with a significant share of about Rs7,000 crore (30 per cent) in RCOM/RTL/RITL debt resolution plan, while other foreign lenders will get Rs2,300 crore (10 per cent share), and SBI and Indian Banks Rs13,000 crore from the proceeds under the current plan.
The Department of Telecommunications (DoT) has objected to the debt resolution scheme proposed for Reliance Communications (RCom) and subsidiary Reliance Telecom Ltd (RTL) under the Insolvency and Bankruptcy Code, but the rules are against DoT.
The DoT has also, earlier this week, told the National Company Law Tribunal's (NCLT) Mumbai Bench that the resolution cleared by the lenders did not consider the statutory AGR dues to be paid to the government.
The NCLT had directed the DoT to file their submission by Friday, when the matter will be heard.
The Supreme Court also, on Thursday, observed that the government may not be able to recover any of its adjusted gross revenue (AGR)-related dues from bankrupt telecom operators through the insolvency resolution process.
A three-judge Supreme Court bench, headed by Justice Arun Mishra said any successful resolution applicant for the bankrupt telcos - Reliance Communications Ltd, Aircel Ltd and Videocon Telecommunications Ltd - can decline to pay AGR dues after spectrum is transferred under the Insolvency and Bankruptcy Code (IBC). The observation came in response to Aircel’s submission that the right to use radio airwaves is an asset of a telecom operator undergoing insolvency proceedings and, thus, can be sold to a new buyer.
The court’s observation implies it wants to make it clear to the government, which is classified as an operational creditor under the bankruptcy code, do not get preference on recovery proceeds.
A three-judge bench said any successful resolution applicant for the bankrupt telcos can deny paying the AGR dues after spectrum is transferred under the Insolvency and Bankruptcy Code (IBC).
The Supreme Court on Thursday observed that the government may not be able to recover any of its adjusted gross revenue (AGR)-related dues from bankrupt telecom operators through the insolvency resolution process, adding pressure on the government to try harder.
A three-judge bench, headed by Justice Arun Mishra, said any successful resolution applicant for the bankrupt telcos—Reliance Communications Ltd, Aircel Ltd and Videocon Telecommunications Ltd—can deny paying the AGR dues after spectrum is transferred under the Insolvency and Bankruptcy Code (IBC). The observation came in response to Aircel’s submission that the right to use radio airwaves is an asset of a telecom operator undergoing insolvency proceedings and, thus, can be sold to a new buyer.
Aircel’s insolvency resolution process concluded in June, with UV Asset Reconstruction Co Ltd emerging as the highest bidder. Aircel owes DoT Rs12,389 crore in AGR dues.
Meanwhile, the telecom sector remained in focus this entire week over Supreme Court's hearing on adjusted gross revenue (AGR) dues case and its staggered payment timeline.
The three major stocks from the space reacted differently every day. Reliance Communications' shares surged while Vodafone Idea and Bharti Airtel continued to swing between gains and losses.
Since Monday, Vodafone Idea's share price slipped 2.76 per cent while Bharti Airtel rose 0.75 per cent, to current levels. Meanwhile, Reliance Communications' shares surged 12.24 percent.
This hearing remains significant for the telcos' especially as it involves a whopping amount of over Rs 1,00,000 crore to be paid by all the telcos as AGR dues.
In case of Reliance Communications, the Supreme Court was informed by senior advocate Harish Salve that Reliance Jio had already paid Rs 195 crore AGR dues and that if there were any remaining dues, if at all, they would be paid by Jio as well.
For Vodafone Idea and Bharti Airtel, the court said the total AGR demand came in at Rs58,254 crore with the company so far clearing Rs7,854 crore. For Bharti Airtel, the total AGR demand came in at Rs 43,980 crore of which the telco has so far paid Rs 18,004 crore. Both are now seeking a 15-year timeline to pay the remaining Rs 50,400 crore dues and Rs 25,976 crore respectively.
On July 20, the apex court had reserved its order saying that there is "no going back" on the DoT demand on the AGR issue, and it will only consider the timeline. The AGR dues relate to an apex court ruling on October 24 last year when it upheld the government's broader definition of AGR, on which it calculates various levies like spectrum usage charges and license fees.