15 June 2019: Aircel’s resolution professional and its proposed acquirer UV Asset Reconstruction Co. Ltd (UVARCL) have started talks with Bharti Airtel, Vodafone Idea and Reliance Jio to sell the bankrupt telco’s spectrum, said people with knowledge of the matter. That appears to contradict the stand of the Department of Telecommunications (DoT) that only the government can sell airwaves via auctions, they said.
The DoT’s view stemmed from the realisation it could get only Rs 2-3 crore from the resolution process cleared by the committee of creditors (CoC). That compares with the Rs 10,000 crore it has sought and the Rs 2,000 crore approved by the resolution professional Deloitte, said the people cited above. DoT’s opposition is also based on the government’s view that spectrum is a sovereign asset and a telco is only given right of use for a specific time period, they said. It doesn’t become the operator’s property.
“UVARCL has already held initial round of talks with existing telcos to sell Aircel’s spectrum in the 900 MHz and 1800 MHz bands,” said one of the persons.
Spectrum is Aircel’s most valuable asset. Another person said that the spectrum bands, which are valid until 2026 except for Tamil Nadu, “should evoke interest from the telcos planning to expand their 4G base but at about a 20-25% discount on the base price offered in last auction.” Aircel has previously told the National Company Law Tribunal that its spectrum is worth Rs 1,100-2,000 crore. Bharti Airtel, Vodafone Idea, Reliance Jio Infocomm, Aircel, Deloitte and UVARCL did not respond to queries.
Less than Rs 100 crore has been earmarked for operational creditors, including the DoT, in the resolution plan approved by the CoC, according to the people aware of developments. “Aircel’s asset value has depleted tremendously,” said one of them, “and given the circumstances even the financial creditors cannot recover a lot and thus the operational creditors have even a lesser chance.”
Financial creditors will in all “be able to recover about Rs 3,000 crore or at most 20% of their exposure,” he said. The DoT argued before the NCLT that Aircel’s spectrum should be returned, added to the pool and auctioned at market rates.
“The DoT needs to recover its dues but there is not much one can do since the assets’ value has deteriorated,” said the person. Apart from spectrum, the assets include the enterprise business, fibre and land parcels along with some infrastructure. The NCLT Mumbai bench at its last hearing on Monday, directed resolution professional Deloitte to send the DoT its proposal on how the government can recover the money.
“The DoT can fight and even take the matter up to the Supreme Court,” said one of the people cited earlier. “It was aware of the resolution plan since it had attended the committee of creditors’ meetings but did not have a voting right by virtue of being an operational creditor.”
Aircel declared bankruptcy in March 2018 after failing to repay debt of Rs 20,000 crore. It faced claims worth Rs 20,000 crore from lenders and that for a similar amount from operational creditors. The company has been administered by Deloitte for a year and is in the last stage of the insolvency process, as part of which the CoC has agreed to hand over the reins to asset reconstruction firm UVARCL.
An application for the appointment of the asset reconstruction company is also pending in the NCLT. The government will probably want the spectrum to revert to it as the Aircel case could set a precedent, said experts. Reliance Communications has also landed up in the insolvency court and is battling the DoT over airwaves, they pointed out.