Ericsson’s Indian subsidiary files insolvency case against Reliance group
Ericsson wants to recover unpaid dues from three Reliance companies amounting to $180m
Mumbai — Ericsson’s Indian subsidiary has filed insolvency petitions against Reliance Communications and two of its companies to recover unpaid dues, the Indian mobile operator said in a stock exchange filing on Wednesday.
The Swedish telecoms equipment maker, which signed a seven-year deal in 2014 to operate and manage Reliance’s nationwide network, is seeking a total of 11.55-billion rupees ($180m) from the three companies, the filing said.
Reliance said it planned to challenge the insolvency petitions. The filing said the Ericsson case would go before the national company law tribunal, the designated court for bankruptcy cases in India, on September 26.
"Ericsson has done this as a last resort to resolve an issue regarding debt that Reliance owes to Ericsson for services provided under a contract. As the legal process is ongoing, we don’t have any further comments at this point," the Swedish company said.
The petitions come as Reliance, controlled by billionaire Anil Ambani, races to seal deals to sell a stake in its tower assets to Canada’s Brookfield and to merge its mobile services business with rival Aircel.
Reliance reported its third quarterly loss in a row last month and is trying to find ways to cut its debt after creditors gave it a reprieve on loan repayments until the end of 2017. The Brookfield and Aircel deals are expected to reduce its debt burden by 250-billion rupees. Ambani said at the time of the loan reprieve that he expected to complete the deals by September.
The company’s losses are, in part, a result of competition from free-voice and cut-price data plans offered by Reliance Jio Infocomm, the telecom start-up backed by Ambani’s elder brother and India’s richest man Mukesh Ambani.
Ericsson is aiming to recover 4.91-billion rupees from Reliance Communications, 5.35-billion from Reliance Infratel and 1.29-billion from Reliance Telecom, the filing said. Reliance Communications shares closed 4% lower on Wednesday before the filing was released, after local media reports said Ericsson had filed an insolvency plea.
Last year, India revamped its bankruptcy laws to help cut a record $150bn in impaired bank loans. The rules allow financial as well as business creditors to trigger bankruptcy proceedings against a company which has defaulted on payments.