Reliance Communications Clears Creditor Bump, Faces New Hurdle

Debt-hit Reliance Communications Ltd. got some reprieve on Wednesday after two major creditors conditionally agreed to the proposed merger of its wireless operations with Aircel and the plan to sell a majority stake in its tower business. But the Department of Telecommunications emerged as a new stumbling block to its deal with Aircel.

The Anil Ambani-led company, which has sought clearance from the National Company Law Tribunal for the two deals, managed to placate the China Development Bank and the Hong Kong Shanghai Banking Corporation saying a green signal will help it reduce its debt burden by more than half to over Rs 20,000 crore.

The creditors told RCom that it should move ahead only after receiving their written communication, barring which they would be free to raise reservations at a later stage. The two proposed deals are crucial as they helped RCom win a seven-month moratorium from its lenders to repay loans after rating agencies downgraded its debt to default.

The telecom operator is looking to reduce its Rs 45,733-crore gross debt through the merger and the sale tower assets to Canada's Brookfield Group.

DoT, however, objected to RCom's efforts contending that the Supreme Court had restrained Aircel from selling and trading in the 2G spectrum space. B N Chatterji, who represented DoT, told the NCLT that Aircel's share of spectrum space was under scrutiny as part of the probe into the 2G scam.

Aircel countered that the apex court had been informed about its proposed merger with RCom. Its counsel Navroz Seervai said they had also submitted an affidavit giving the details and top court had not raised any objections. Seervai said DoT's stance was a ploy to stall the merger by creating confusion.

RCom also encountered continued resistance from its vendors Ericsson India and Bharti Infratel Ltd. The two companies have accused RCom of going ahead without taking its all creditors into confidence.

Senior counsel Ravi Kadam, representing Chennai Networks Infrastructure, an Aircel creditor, also urged the NCLT to use its discretionary powers to call a meeting of creditors to discuss the ramifications of the proposed deals. He said they were not absolutely convinced that RCom's plans would not jeopardise creditors' interests.

The hearing will continue on Thursday.