A headline spectrum sale deal between the companies of Ambani siblings has hit a major hurdle as telecom authorities have refused to approve the transaction that had the green light of the apex court.
The Depart of Telecommunication (DoT) decision on the Rs 25,000 crore deal is a major blow to Anil Ambani's Reliance Communications (RCom), which saw the sale as a lifeline to pare its debt burden down to Rs 18,000 crore.
DoT refused to approve the deal after Mukesh Ambani's Reliance Jio in a letter on Friday refused to take responsibility for the past dues that the younger brother's company owed the government, reports say.
DoT has taken that stand that the trading rules clearly says it can ask both the parties of a spectrum sale deal or any one of them to pay the dues. As Jio imposed conditions to its commitment, DoT officials say, they cannot accept it as it goes against the guidelines.
The rejection of the deal means a setback to RCom's efforts to settle outstanding dues of about Rs 550 crore with Swedish telecom equipment maker Ericsson, which is nearly due.
The Supreme Court had set a December 15 deadline for payment to Ericsson which RCom missed. The foreign firm could reinstitute insolvency proceedings against the company besides the revival of contempt of court petition against its chairman Anil Ambani.
The Supreme Court order had directed DoT to approve the spectrum deal accepting a Rs 1,400 crore corporate guarantee, instead of the bank guarantee that DoT sought, as well as a piece of land as collateral from an RCom subsidiary to cover the spectrum user charge of Rs 2,947 crore, which RCom disputes.
DoT took the view that in case of any issue with RCom corporate guarantee or land parcel, Jio being the buyer, would have to make the payments. But Jio has refused to give the undertaking to pick up the tab.
In its letter, Jio claims the spectrum trading agreement on 122.4 MHz spectrum sale stipulates that RCom will provide bank guarantees to DoT for all disputed claims.
The agreement struck in late 2017 was central to its plan to manage its Rs 46,000-crore debt.