The headquarters of Ericsson AB stands in Kista, Sweden (Photographer: Johan Jeppsson/Bloomberg)

Ericsson Considering New Clauses To Avoid RCom-Like Situations 

Swedish telecom gear maker Ericsson is considering tweaking provisions in business deals to avoid situations like those it is facing with Reliance Communications Ltd.

The company sued RCom and its promoter Anil Ambani to recover dues of about Rs 1,500 crore, of which it managed to receive only Rs 550 crore.

"We think fairness sort of came true in the end. But of course, as we sell new deals...we try to avoid those things. But it is hard to tell because who could have seen that coming. That was a tough period," Peter Laurin, senior vice president and head of business area managed services at Ericsson told PTI. He was responding to a question whether the company is planning to bring any change in business provisions following the RCom issue.

Ericsson signed managed services contract with RCom after Chinese telecom gear maker Huawei stopped services to the debt-ridden telecom operator because of payment issues.

However, legal experts feel that Ericsson may have to deposit the amount back in trust and retentionship account.

The National Company Law Appellate Tribunal on April 30 allowed insolvency proceedings against RCom after the Anil Ambani-led firm withdrew a challenge to such a move. "The immediate fallout of IBC proceedings would be that the payment of Rs 550 crore made by RCom to Ericsson would be questioned by the financial creditors.

"Under Insolvency and Bankruptcy Code, no payment can be made to any creditor, much less an operational creditor during Corporate Insolvency Resolution Process," Punit Dutt Tyagi, Partner at Lakshmikumaran & Sridharan said.

Also read: RCom’s Insolvency: Will Ericsson’s Rs 550-Crore Victory Be Short-Lived?

He said the payment to Ericsson has been made during the resolution process, and that too pursuant to the proceedings under the Insolvency and Bankruptcy Code, it is quite likely that Committee of Creditors or the NCLT may ask Ericsson to deposit the amount with the resolution professional.

The Swedish firm posted decline in sales contribution from India in the first quarter of 2019 to 4 percent compared to 6 percent recorded in the same period a year ago. Laurin said India is very important for managed services business of Ericsson but at the same time it is complex and a demanding market too.

“India is super important. It is important for two reasons. It is important because we have some of our largest customers here. We are doing a lot of managed services for both Bharti Airtel and Vodafone Idea. With lot of operations, it is very complex and very demanding market too,” he said.

With around 25,000 employees, Ericsson has the largest employee base in India and largest offshore site for managed services.