Aircel, country's last small mobile phone operator, files for bankruptcy
, ET Bureau & Agencies|
Updated: Feb 28, 2018, 06.40 PM IST
The last standing fringe operator Aircel, along with its units-Aircel Cellular and Dishnet Wireless, has filed for bankruptcy in the National Companies Law Tribunal (NCLT)- Mumbai on Wednesday. This last resort was taken when the Malaysian owned Maxis company failed to strike a truce with its lenders and shareholders.
"Post detailed discussions with the financial lenders and shareholders, the company could not reach consensus with respect to restructuring of its debt and funding," said Aircel in its statement on Wednesday.
The operator added that despite discussions and the invoking of a Strategic Debt Restructuring scheme in January 2018 pursuant to the then guideline of the Reserve Bank of India (“RBI”), no agreement could be reached. "Under current circumstances, especially after the 12 February 2018 RBI guidelines, the Company believes resolution process under the Code is an appropriate recourse," said the telcoom firm.
ET in its February 19 edition first reported that the Rs 15,500 crore debt laden telecom operator will be filing for bankruptcy.
"The Board of Directors acknowledged that it has been facing troubled times in a highly financially stressed industry, owing to intense competition following the disruptive entry of a new player, legal and regulatory challenges, high level of unsustainable debt and increased losses. This has caused significant negative business and reputational impact on the Company," said the operator.
Aircel emphasized that insolvency is not a proceeding for liquidation and done to “find best possible resolution for the current situation and that would be in the best interest of everyone (vendors, distributors, employees, etc.) to protect and preserve the value of the Company and manage the operations”.
According to sources, the parent firm under businessman Ananda Krishnan’s call to pull the plug on further fund infusion added to its woes. Aircel shutting down will impact tower firms, vendors, distributors and 500 employees associated with the operator.
Then there are license fees, taxes, and interest payments. Idea Cellular has snapped its ties with the operator for unpaid dues of Rs 60 crore and Vodafone is expected to follow suit. GTL and ATC have taken Aircel to courts to recover their dues.
“In these difficult times, the company seeks co-operation from all its stakeholders including the vendor fraternity and channel partners during the IBC process. The company requests continued services from the suppliers and partners for the ongoing business of the Company,” said the operator.
The telco had recently shut its services in 6 circles to ficus on its better performing ones - is the fourth company to go under after Reliance Jio Infocomm launched services in September 2016, undercutting prices in the telecom sector and nearly halving revenue realizations for the industry. Norway-based Telenor is transfering its assets to Airtel for almost no charge, as also the wireless business of Tata Teleservices. Reliance Communications was forced shut and its wireless assets are being bought by Jio.
End of an ambition
Krishnan entered India’s phone market, the world’s second largest by users, in 2005 by buying a majority stake of Aircel for about $1 billion and spent billions more trying to build the business. In 2011, it was one of the two operators to launch Apple’s iPhone 4 in India. But the appeal of having more customers than the populations of various countries lured so many companies that India morphed into one of the world’s most crowded phone markets -- at one point having a dozen players. Carriers charged some of the lowest phone rates in the world, resulting in smaller operators to either merge or get out. Competition intensified in 2016, when India’s richest man stormed into the market with free calls.
For Aircel, which ranked as the nation’s sixth-largest operator with 85 million subscribers as of end-December, it found a merger partner in billionaire Anil Ambani’s Reliance Communications Ltd. only to see the deal collapse in October. Aircel also hit a setback in January 2017, when India’s highest court barred the company from selling or leasing its airwaves in a broader graft lawsuit.
Aircel had total debts of $6.7 billion as of the end of March 2016, the latest period such figures were publicly available.
What happens next?
Should the Indian tribunal accept Aircel’s request, the company will be placed under a court-appointed insolvency resolution professional who will have as long as 270 days to work out a repayment plan, according to the Insolvency & Bankruptcy Code 2016. If no plan is agreed on by the deadline, the law mandates the company be declared bankrupt and thrown into liquidation.
"Post detailed discussions with the financial lenders and shareholders, the company could not reach consensus with respect to restructuring of its debt and funding," said Aircel in its statement on Wednesday.
The operator added that despite discussions and the invoking of a Strategic Debt Restructuring scheme in January 2018 pursuant to the then guideline of the Reserve Bank of India (“RBI”), no agreement could be reached. "Under current circumstances, especially after the 12 February 2018 RBI guidelines, the Company believes resolution process under the Code is an appropriate recourse," said the telcoom firm.
ET in its February 19 edition first reported that the Rs 15,500 crore debt laden telecom operator will be filing for bankruptcy.
"The Board of Directors acknowledged that it has been facing troubled times in a highly financially stressed industry, owing to intense competition following the disruptive entry of a new player, legal and regulatory challenges, high level of unsustainable debt and increased losses. This has caused significant negative business and reputational impact on the Company," said the operator.
Aircel emphasized that insolvency is not a proceeding for liquidation and done to “find best possible resolution for the current situation and that would be in the best interest of everyone (vendors, distributors, employees, etc.) to protect and preserve the value of the Company and manage the operations”.
According to sources, the parent firm under businessman Ananda Krishnan’s call to pull the plug on further fund infusion added to its woes. Aircel shutting down will impact tower firms, vendors, distributors and 500 employees associated with the operator.
Then there are license fees, taxes, and interest payments. Idea Cellular has snapped its ties with the operator for unpaid dues of Rs 60 crore and Vodafone is expected to follow suit. GTL and ATC have taken Aircel to courts to recover their dues.
“In these difficult times, the company seeks co-operation from all its stakeholders including the vendor fraternity and channel partners during the IBC process. The company requests continued services from the suppliers and partners for the ongoing business of the Company,” said the operator.
The telco had recently shut its services in 6 circles to ficus on its better performing ones - is the fourth company to go under after Reliance Jio Infocomm launched services in September 2016, undercutting prices in the telecom sector and nearly halving revenue realizations for the industry. Norway-based Telenor is transfering its assets to Airtel for almost no charge, as also the wireless business of Tata Teleservices. Reliance Communications was forced shut and its wireless assets are being bought by Jio.
End of an ambition
Krishnan entered India’s phone market, the world’s second largest by users, in 2005 by buying a majority stake of Aircel for about $1 billion and spent billions more trying to build the business. In 2011, it was one of the two operators to launch Apple’s iPhone 4 in India. But the appeal of having more customers than the populations of various countries lured so many companies that India morphed into one of the world’s most crowded phone markets -- at one point having a dozen players. Carriers charged some of the lowest phone rates in the world, resulting in smaller operators to either merge or get out. Competition intensified in 2016, when India’s richest man stormed into the market with free calls.
For Aircel, which ranked as the nation’s sixth-largest operator with 85 million subscribers as of end-December, it found a merger partner in billionaire Anil Ambani’s Reliance Communications Ltd. only to see the deal collapse in October. Aircel also hit a setback in January 2017, when India’s highest court barred the company from selling or leasing its airwaves in a broader graft lawsuit.
Aircel had total debts of $6.7 billion as of the end of March 2016, the latest period such figures were publicly available.
What happens next?
Should the Indian tribunal accept Aircel’s request, the company will be placed under a court-appointed insolvency resolution professional who will have as long as 270 days to work out a repayment plan, according to the Insolvency & Bankruptcy Code 2016. If no plan is agreed on by the deadline, the law mandates the company be declared bankrupt and thrown into liquidation.
