6 June 2019: The department of telecommunications (DoT) plans to oppose the sale of airwaves held by bankrupt telcos during the insolvency resolution process, a move that will make Aircel and Reliance Communications less attractive to buyers and hit their lenders.
A senior DoT official told ET that the department will take all legal steps, including moving the Supreme Court if necessary, to ensure that that the resolution professional doesn’t get the right to sell spectrum during the bankruptcy proceedings. To begin with, DoT is expected to state its position at the ongoing hearings of the Aircel bankruptcy process at the National Company Law Tribunal (NCLT).
“DoT’s view is that this spectrum belongs to the government and it does not come under the definition of property of the telco,” said this official.
The department believes that the government is the licensor of the airwaves and is the only one authorised to sell it through auctions, according to existing law. More so, since spectrum is a finite and sovereign asset, it makes the government the sole authority responsible for allocating it, the official explained.
‘Legal Opinion Being Sought’
“A legal opinion is being sought… All legal options are also being explored,” said a second official aware of the matter.
The DoT is of the view if the spectrum is sold by the resolution professional under the Insolvency and Bankruptcy Code 2016, the value will be far less than the market price of airwaves. In addition, the sale proceeds will first accrue to banks and other financial lenders, with operational creditors like the DoT way down in the priority list, in terms of getting paid.
“We’re examining what should be the way forward…whether this category of transaction can be removed from IBC,” the second official said.
One of the officials said that if NCLT, which is the dedicated insolvency court, were to give a decision on the lines that spectrum could be sold by the RP managing the bankrupt telco, the government would be “within its rights to move the Supreme Court”.
The move assumes huge significance as the result of the decision will affect the insolvency, bankruptcy and revival proceedings of defunct carriers Aircel and Reliance Communications. Without the prized airwaves, the companies would have little value, or perhaps no value at all, to potential buyers. In addition, the outcome in this issue could impact sectors such as mining as well.
UV Asset Reconstruction Company Ltd. (UVARCL), which has put in a bid with Aircel’s RP Deloitte to take over Aircel, will argue forcefully against the DoT’s view. “The spectrum is part of the other assets that will be with the company. The DoT cannot take away the spectrum,” said a person aware of the development.
“We are bound by confidentiality obligations and are unable to comment on client-specific matters,” a Deloitte spokesperson said, while UVARCL said it “can’t comment at this stage”. The NCLT will next hear the Aircel matter on June 10.
The NCLT will next hear the Aircel matter on June 10 while the next hearing on RCom is scheduled for June 21.
The NCLT appointed interim resolution professionals (IRPs) of RCom — which has a debt of Rs 46,000 crore — and two of its subsidiaries have admitted claims of about Rs 66,000 crore against the companies. Aircel, on its part, has a debt of about Rs 20,000 crore.
Mails to RBSA Advisors LLP, IRPs of RCom and its two units didn’t elicit a response till the time of going to press.
Manoj Kumar, partner at insolvency specialist firm Corporate Partners, backed DoT’s stance.
“I believe, legally, DoT is right. The spectrum is a government property and the telecom operators are just licensees. If the licensees are not able to use it or can’t pay a fee, the spectrum licence may be revoked,” Kumar said.
Kumar said that the final decision on such an issue will have wider ramifications for sectors beyond telecom, such as mining.
“Similar situation may arise in all the cases where the key asset is government licences, like mining licence. If insolvency licences are revoked, then there would be little hope of resolution and there will be huge haircuts,” he said.