Aircel's Spectrum License - The National Company Law Tribunal (NCLT) has ruled that Aircel has the "right to use" its spectrum and directed the Department of Telecommunications (DoT) not to suspend the bankrupt telco’s licenses. The verdict offers huge relief to Aircel, which, under an insolvency process, is on the verge of selling its assets, of which airwaves are the most valuable. The court's conclusion is also crucial to another bankrupt operator - Reliance Communications (RCom) – which is also aiming to transfer the rights of their spectrum to the bidder of their assets, to raise funds and repay lenders.
DoT however plans to challenge the verdict, officials told ET. “Hereby instruct the concerned DoT authority not to make any attempt to cancel the impugned license issued in favour of the debtor company," the NCLT ruled. The verdict was made available on the NCLT website in the early hours of Thursday. According to people aware of the developments, Aircel, being run by resolution professional Deloitte, is relieved that that it can use this order to transfer the rights of spectrum use to the bidder - in this case UV Asset Reconstruction Company Ltd (UVARCL) - which has been shortlisted by the lenders of the bankrupt telco.
"The spectrum now will be used by the telco/UVARCL until its license expires and then it goes back to the government," said a person aware of the development. NCLT is expected to pronounce its verdict on the resolution plan shortly. The government though is expected to explore all legal options to ensure bankrupt telcos return their spectrum and the matter may be taken up to higher courts.
DoT cannot let go of this fight because it is waging a similar war with RCom, where stakes are higher," said a senior lawyer, who did not want to be named. RCom, also in the midst of an insolvency process, is fighting a similar battle with the government over spectrum, with the likes of Airtel and Reliance Jio having bid for the telco’s assets, including spectrum.
Coincidentally, Deloitte is in the RP for RCom as well. The DoT is against RPs being allowed to transfer spectrum under the insolvency process, arguing that airwaves are a natural resource which belongs to the government and is just leased to an operator with a right to use for 20 years, DoT in fact wanted bankrupt telcos to return their airwaves to the government which it can then auction. But the NCLT bench, in its Aircel ruling, concluded that if the licenses are revoked during the insolvency process, it would hamper the resolution plan.
" We hereby direct that the clauses of "moratorium" are squarely applicable on this Corporate Insolvency Resolution Process Proceedings, hence need not be interrupted or hampered by any authority," stated the order. The court did not dispute that the ownership of the spectrum is the government, but the right to use belongs to the telco.
“Bench is of the view that, admittedly the License/Spectrum is an asset of State over which the Corporate Debtor has no right of ownership, therefore, up to this extent the argument of the Government is hereby accepted...,
” said the court order but also said that resolution professional, “is not demanding the 'ownership' of the license as a product but simply seeking uninterrupted use of the said intangible asset”. The battle between Aircel, which filed for bankruptcy in early 2018 weighed under a debt of Rs 26,000 crore, and DoT started when the latter demanded dues on airwaves be paid to the government failing which licenses should be suspended. DoT's views in the Aircel case also came on the back of the realisation that it would barely get a crore or two from the resolution plan cleared by the Committee of Creditors (CoC) for the bankrupt operator.
The telecom department had filed claims worth some Rs10,000 crore, of which only Rs2,000 crore was approved by Deloitte, the RP. Aircel holds spectrum in Andhra Pradesh, Delhi, Karnataka, Mumbai, Rajasthan and Tamil Nadu circles in the 900 Mhz, 1800 Mhz and 2100Mhz bands. The spectrum, which are valid until 2026 except for Tamil Nadu, should evoke interest from the buyers planning to expand their 4G base but at about a 20-25% discount on the base price offered in last auction, executives have previously said. Aircel has previously told the NCLT that its spectrum is worth Rs 1,100-2,000 crore.
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