Troubles for Anil Ambani's Reliance Communications seems to just get worse by the day. Sources said the loss-making company that had earlier sought deferment in debt servicing obligations from banks, has approached the telecom ministry to surrender a part of its spectrum holdings in the 1800-MHz frequency. RCom has also sought a refund of some of the payments which have been made.
If approved by the government, the move will also enable the debt-laden company to escape paying the instalments towards the purchase of spectrum that it now wants to surrender. This is probably the first time a company has sought to return the much-coveted airwaves to the government. “RCom has written to the telecom ministry, seeking to surrender small quantities of spectrum in four circles. The spectrum to be surrendered is in Mumbai, Karnataka, Haryana and Punjab, and has been purchased for around £34 million,” an official source said. While the spectrum in Mumbai was purchased in 2014, bids for the other three were won in 2016. The quantity of spectrum in each circle is 0.6 MHz.
Spectrum purchase agreement with the government revealed that while 33 per cent of the bid amount has to be paid immediately, rest of the amount has to be paid over a 10-year period following a moratorium of two years. The Mumbai spectrum was purchased for around £16 million, Karnataka for £10.8 million, Punjab for £4.2 million and Haryana for £2.7 million. “The down-payments had been made for the circles at the time of the purchase while for Mumbai, the first instalment has been paid this year. For the other three circles, the instalments start only from next year,” the source said.
Meanwhile, analysts said the proposal of RCom only highlights the “industry's pain” as companies confront large payment liabilities at a time when they face financial losses and revenue shrinkages. However, industry analysts said that surrender of airwaves looks highly improbable as there appears to be no clause in the spectrum sale documents for such a measure. The entry of Reliance Jio in the telecom space in September last year has crippled the business model of the industry, especially as the new player began operations by offering lifetime free-voice on its network. Before the launch of Jio, domestic telecom players were realising a little over 70% of their revenues through voice operations.
