India's Reliance Communications has hit a potentially major roadblock to its attempt to sell its wireless assets to Reliance Jio Infocomm to reduce its substantial debt burden.
An Indian arbitration court has issued an interim order prohibiting RCom and two of its subsidiaries from transferring or selling assets without the court's permission, Reutersreported.
The order was made in response to a petition from Ericsson seeking recovery of unpaid dues. Ericsson filed insolvency petitions against RCom in September seeking to recover a total of around $177.8 million from the company.
RCom owes banks around $7 billion, according to the latest debt figures made available to the public, and this excludes its debts to vendors.
In an attempt to reduce this debt, RCom arranged to sell its wireless assets to Reliance Jio Infocomm in a deal worth a reported 240 billion rupees ($3.69 billion). These include spectrum tower, fiber and other assets.
But this deal could now be threatened by the court order, which would also result in further insolvency proceedings.
The company's biggest foreign lender, China Development Bank, had already filed an insolvency petition against the company, but withdrew this petition after RCom announced a debt reduction plan which included the Jio deal.