RCom shares, bonds weaken after Ericsson's insolvency petition

Mumbai: Shares in Reliance Communications fell as much as 2.3 per cent 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 11.55 billion rupees ($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 per cent 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.