Department of Telecommunications to oppose spectrum sale of bankrupt telcos
In a move that will make Aircel and Reliance Communications less attractive to buyers and blow their lenders, the department of telecommunications (DoT) intents to oppose the sale of spectrum held by bankrupt telcos during the insolvency resolution process,
According to source, a senior DoT official said that the department will take all legal steps, including moving the Supreme Court if necessary, to ensure that that the resolution professional doesn’t get the right to sell spectrum during the bankruptcy proceedings.
To begin with, DoT is expected to state its position at the ongoing hearings of the Aircel bankruptcy process at the National Company Law Tribunal (NCLT).
DoT’s vision is that this spectrum belongs to the government and it does not come under the definition of property of the telco.
“The department believes that the government is the licensor of the spectrum and is the only one authorised to sell it through auctions, according to existing law. Since spectrum is a finite and sovereign asset, it makes the government the sole authority responsible for allocating it,” a senior DoT official explained.
All legal options to be explored
The DoT is of the vision if the spectrum is sold by the resolution professional under the Insolvency and Bankruptcy Code 2016, the value will be very less than the market price of spectrum.
In addition, the sale proceeds will first accrue to banks and other financial lenders, with operational creditors like the DoT way down in the priority list, in terms of getting paid.
One of the officials said that if NCLT, which is the dedicated insolvency court, were to give a verdict on the lines that spectrum could be sold by the RP managing the bankrupt telco, the government would be “within its rights to move the Supreme Court”.

The move assumes huge consequence as the result of the decision will affect the insolvency, bankruptcy and revival proceedings of defunct carriers Aircel and Reliance Communications. Without the prized spectrum, the companies would have little value, or perhaps no value at all, to potential buyers.
“The spectrum is part of the other assets that will be with the company. The DoT cannot take away the spectrum,”
said a person aware of the development.
RCom — which has a debt of Rs 46,000 crore — and two of its subsidiaries have admitted claims of about Rs 66,000 crore. Aircel, on its part, has a debt of about Rs 20,000 crore.
The NCLT will next hear the Aircel matter on June 10 and the next hearing on RCom is scheduled for June 21.
“I believe, legally, DoT is right. The spectrum is a government property and the telecom operators are just licensees. If the licensees are not able to use it or can’t pay a fee, the spectrum licence may be revoked.” said Manoj Kumar, partner at insolvency specialist firm Corporate Partners.
The final verdict on such an issue will have wider consequences for sectors beyond telecom, such as mining.
