RCom will furnish Rs 774 crore bank guarantees, sell spectrum to Jio

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Reliance Communications has informed the Telecom department that it will shortly furnish bank guarantees worth Rs 774 crore and sell spectrum to Reliance Jio Infocomm, which will meet all future liabilities associated with the airwaves.

“There was a letter this week which assured the Department of Telecommunications that not only will bank guarantees of Rs 774 crore be taken care of but Jio will take care of the future spectrum related liabilities over the next 15-16 years,” said a department official aware of the development.

This means the government is assured of spectrum payment dues of about Rs 15,000 crore over the next decade and more, the official said. These airwaves were bought by RCom in the 2013 and 2015 auctions, with payment to be made over 18 years.

Jio and RCom didn’t respond to emailed queries seeking comment. RCom shares gained 9.3% to Rs 20.07 at the close on the BSE on Thursday.

People familiar with the matter said RCom is likely to furnish the bank guarantees for Rs 774 crore on Friday, when the Telecom Disputes Settlement and Appellate Tribunal is set to hear the company’s plea against DoT’s show-cause notice for cancelling its licences.

DoT had said it encashed bank guarantees for over Rs 900 crore after RCom did not make payment for spectrum in April, breaching licence conditions. It said RCom had also not replenished the encashed bank guarantees.

In its plea, RCom termed DoT’s notice “illegal, arbitrary and without jurisdiction.” Cancellation of RCom’s licences in 14 circles and the revocation of spectrum would have scuttled its plan to sell the airwaves to Jio.

RCom expects to raise Rs 18,000 crore from the sale of wireless assets to Jio and real estate to Canada’s Brookfield and reduce its Rs 46,000 crore debt by repaying lenders.

The tribunal had directed DoT not to take any coercive action till the hearing on August 10. The telco told the tribunal that DoT had already encashed bank guarantees to cover spectrum payments that were due in April this year.

It also said bank guarantees for payments due in March/April 2019 would be “duly furnished” after RCom sells its wireless assets.

Reliance Communications said if the licences are cancelled, DoT, too, would lose out since there are not many takers for spectrum in the struggling Telecom industry today. The department would lose out on assured, although delayed, payment from RCom and its units. “We will get nothing by cancelling the licences and would have lost the money,” said the official.

RCom recently staved off insolvency by striking a payment deal with operational creditor Ericsson and some minority investors who had dragged the company to bankruptcy court. The Supreme Court recently ruled that its asset sale could go ahead unhindered

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