Business

After Ericsson’s Insolvency Petition, RComm’s Shares, Bonds Weaken

The Swedish telecoms equipment maker is seeking a total of Rs 11.55 billion from the company and two of its subsidiaries.

A man opens the shutter of a shop painted with an advertisement of Reliance Communications in Mumbai, India, November 3, 2015.   Credit: Reuters/Shailesh Andrade/File Photo

A man opens the shutter of a shop painted with an advertisement of Reliance Communications in Mumbai, India, November 3, 2015. Credit: Reuters/Shailesh Andrade/File Photo

Mumbai: Shares in Reliance Communications fell as much as 2.3% in early trading on Thursday, a day after the Indian arm of Ericsson filed a petition seeking to drag the debt-laden telecom firm into insolvency due to unpaid dues.

The Swedish telecoms equipment maker, which signed a seven-year deal in 2014 to operate and manage Reliance Communications’ nationwide network, is seeking a total of Rs 11.55 billion ($180 million) from the company and two of its subsidiaries.

Reliance Communications, widely known as RCom, reported its third quarterly loss in a row last month. It is trying to find ways to cut debt after lenders gave it a reprieve on loan repayments until the end of 2017.

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.

Reliance Communications’ bonds also fell in early trading on Thursday, with its 6.5% bonds due 2020 indicating at 55/60 cents on the dollar, versus earlier indicating at 57/62 on the dollar.

“This seems like the first salvo has been fired but Ericsson is unlikely to push RCom to bankruptcy,” said a Hong Kong-based trader.

Ericsson is protecting its own interests and this could open the door for negotiation later, “but I do expect some selling particularly from private banking bondholders,” the trader said.