Government To Help Feebler Telcos Make Smooth Exit

by CXOtoday News Desk    Oct 03, 2017


The government is looking for ways to allow simpler departure for weaker telecom firms as new mergers and acquisition rules have come up, top officials said ET, a day after the proposed merger between Reliance Communication and Aircel tumbled due to legal and regulatory unpredictability.

A senior official at the ministry said that the solutions for helping the sector have to be done on a “policy level rather than on a company-specific basis to ensure a level playing field,” and with the idea to keep the sector moving.

A Telecom Regulatory Authority of India (TRAI) official, when asked which more convenient ways the regulator can suggest the carriers for its exits, said “We already have the consultation paper on ease of doing business and that should include this (of smoother exits in M&A) particular issue.” 

The RCom-Aircel merger which was announced in September 2016, saw delays of months due to regulatory requirements and legal objections which indicated that RCom was running out of time meet a December 2017 deadline set by lenders to reduce its debt under a strategic debt restructuring (SDR) process.

At present, feebler telcos surrounded with huge debt do not have much options to leave the business without suffering huge financial loss. Maximum what they can do is enter into an M&A or sell their most prized asset- spectrum.

If they are unable to do so and fail to sustain their operations, they will have to surrender the spectrum to the government without any refund and have to close the operations completely which will obviously include huge financial loss and rendering several employees jobless.

Aircel and RCom with debt of Rs 47,000 crore and around Rs 20,000 crore, respectively, are not the only ones in troubled waters. Tata Teleservices has a Rs. 34,000 crore of debt. It could not rope in a buyer and is now said to seeks all kinds of actions including possibly shutting down the business.

“As far as Tata Teleservices is concerned, the group is examining all options at this point in time,” a Tata Sons spokesperson said. “It’s not going to be very easy for them (RCom and Aircel to survive),” said a government official.  “This (merger) was the best way out (exit), now we’ll have to see what options we can come up with,” ET quoted another senior official who did not want to be named. “It is very unfortunate”.

RCom which employs 5,000 employees and Aircel which houses 8,000 employess said they are looking into other options.