RCom shares, bonds weaken after Ericsson's insolvency petition

Shares in Reliance Communications fell as much as 2.3 percent 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 percent 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.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)

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