Department of Telecom set to oppose sale of Aircel, RCom spectrum unless AGR dues paid

If not the telcos, then their buyer or recipient of the airwaves under the insolvency proceedings – UV Asset Restructuring Company (UVARCL) in the case of both Aircel and RCom – should be held liable for statutory dues such as adjusted gross reven...

Mumbai: The central government will oppose transfer of the right to use spectrum of bankrupt telcos undergoing insolvency process such as Aircel and Reliance Communications unless their statutory dues are cleared, officials said.

The telecom department will take this stance before the National Company Law Appellate Tribunal (NCLAT) that will decide on the matter, they said.

If not the telcos, then their buyer or recipient of the airwaves under the insolvency proceedings – UV Asset Restructuring Company (UVARCL) in the case of both Aircel and RCom – should be held liable for statutory dues such as adjusted gross revenue (AGR) dues, officials said.


“The telcos can get clearance (to go ahead with spectrum transfer) if they pay their statutory dues,” one of them said. “If they (bankrupt telcos) are unwilling, will the buyer (of spectrum) pay? The telcos need to make this clear.”

The Supreme Court had last week said NCLAT will decide whether the right to use spectrum held by bankrupt telco Aircel can be transferred while its statutory dues are pending.

The telecom department's stance will further delay asset monetisation plans of bankrupt telcos and impact lenders who are awaiting for proceeds of the sale, experts said.
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UV Asset Reconstruction Company was poised to pick up most of the assets of RCom and all of Aircel. But the Reserve Bank of India recently refused to approve its resolution plan for Aircel.

"Even RBI has stalled their plans and anyhow now the matter will be decided in NCLAT,” a government official said. “The final nod will have to come from DoT on spectrum sale.”

Telcos and DoT have been embroiled in a legal fight over AGR dues. At a hearing in the Supreme Court, the department said bankrupt telcos have not paid AGR dues of more than Rs 40,000 crore. While RCom owes almost Rs 26,000 crore, Aircel owes about Rs 14,000 crore, and Videocon about Rs 1,400 crore.

The Reserve Bank rejected UVARC’s plan for Aircel citing certain laws that govern asset reconstruction companies. This despite the dedicated bankruptcy court in June approving the ARC’s proposal to take over of Aircel and its two units with a 74% stake and to repay Rs 6,630 crore to the bankrupt telco’s financial creditors within five years.
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Experts said another war over spectrum - the most crucial asset of a telcos - will delay the operators’ bankruptcy resolution.

If the resolution plans are not approved, then liquidation is a strong possibility for both Aircel and RCom, they said.
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The government has said in various courts that spectrum is a national asset that cannot be transferred to a third party unless statutory dues are paid and DoT approves the transaction.

Resolution professionals and the lenders of these ailing telcos had argued that spectrum was a precious natural resource that cannot be kept idle and that they could reassign these rights to recover dues.

The insolvent telcos had said lenders including public sector banks would be affected if airwaves are not allowed to be transferred. Spectrum is the security against which banks give loans.
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