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With eye on debt recovery, SBI asks DoT not to revoke RCom’s spectrums

Revocation of spectrum may hurt telco’s sale to RJio, says the lender

Fearing a massive haircut on its loans, State Bank of India (SBI), the country’s largest lender, has moved the Department of Telecommunications (DoT), asking it to reconsider its decision to revoke the spectrum allocated to debt-ridden Reliance Communications (RCom) and Reliance Telecom (RTL).

SBI, which is part of a consortium of lenders to RCom, has maximum exposure, as lead lender, to the beleaguered telecom company.

In its letter to DoT, SBI said RCom’s spectrum, along with other telecom infrastructure and assets, is proposed to be sold to Reliance Jio Infocomm (RJio). The proceeds of the sale will be used to clear RCom’s debt of ₹45,000 crore.

“In the event of the proposed sale process not culminating due to the possible revocation of spectrum allocation by DoT, the lenders may not be able to recover the funds lent, thereby causing irreparable harm to SBI and all other lenders in the consortium”
Rajnish Kumar, SBI Chairman

“In the event of the proposed sale process not culminating due to the possible revocation of spectrum allocation by DoT, the lenders may not be able to recover the funds lent, thereby causing irreparable harm to SBI and all other lenders in the consortium,” SBI Chairman Rajnish Kumar said in the letter to DoT, a copy of which was viewed by BusinessLine.

“We understand from RCom and Reliance Telecom that DoT appears to be contemplating revocation of spectrum allocated to both the companies due to non-submission of bank guarantees that is to be submitted by the companies on expiry of earlier bank guarantees…,”
SBI

“We understand from RCom and Reliance Telecom that DoT appears to be contemplating revocation of spectrum allocated to both the companies due to non-submission of bank guarantees that is to be submitted by the companies on expiry of earlier bank guarantees…,” it said.

It added that DoT should not initiate “coercive action”, as the lenders are in talks with the companies for a possible re-issue of bank guarantees.

The accounts of RCom and RTL have become non-performing assets (NPAs) for the lenders, and the consortium has initiated debt-resolution plans and asset-monetisation plans to recover the dues.

Fresh bank guarantees

In a show-cause notice dated July 22, DoT had sought reasons for not revoking spectrum assigned to RCom and RTL in the auctions held in 2013 and 2015. It had also sought fresh bank guarantees of ₹774 crore for not revoking the spectrum.

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“We request DoT to reconsider the decision to initiate coercive action including the revocation of spectrum allocation, which (reconsideration) will help lenders in recovering the debts owed by RCom and RTL,” SBI said.

RCom has also moved the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) against the DoT. The matter has been posted for hearing on August 10. SBI had earlier urged the NCLT to dismiss a plea by unsecured lenders to put RCom under insolvency.

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