With no turnaround prospects, Aircel files for bankruptcy

Beleaguered telecom service provider Aircel on Wednesday filed for bankruptcy with the Mumbai bench of National Company Law Tribunal (NCLT), citing troubled times in the highly-financially stressed industry. The company also blamed disruptive entry of a new player, legal and regulatory challenges, high debt and increased losses.

Aircel – which has a debt of about Rs15,500 crore - has over  85 million subscribers across 17 telecom circles, according to TRAI data. 

The lenders to Aircel include State Bank of India, China Development Bank, Bank of Baroda, Canara Bank and Punjab National Bank among others.

Malaysia's Maxis Communications holds a 74-per cent stake in the company, while the remaining 26-per cent is held by Sindya Securities & Investments.

The smallest operator in the fast-consolidating Indian telecoms market, Aircel along with its units Aircel Cellular and Dishnet Wireless filed for bankruptcy in the National Companies Law Tribunal (NCLT), Mumbai. This last resort was taken after the Malaysian-owned Maxis, which controls Aircel, failed to strike a truce with its lenders and shareholders.

Aircel said that intense competition following the disruptive entry of a new player (Reliance Jio Infocom), legal and regulatory challenges, a high level of unsustainable debt and increased losses had together caused significant "negative business and reputational impact" on the company.

"The Board of Directors of the Corporate Debtor today announced that they have filed an application under Section 10 of the Insolvency and Bankruptcy Code 2016 for undertaking Corporate Insolvency Resolution Process for the respective companies: Aircel Cellular, Dishnet Wireless, Aircel Ltd," the statement said.

"Post detailed discussions with the financial lenders and shareholders, the company could not reach consensus with respect to restructuring of its debt and funding," Aircel further said in its statement.

In 2016, the company had embarked upon a merger of its wireless business with that of Reliance Communications (RCom). However, it was later called off due to legal and regulatory hurdles.

The company statement also noted that efforts to merge wireless business with another operator did not yield any results and had ultimately lapsed in September 2017, and said it believes that in the current circumstances, resolution process under the Insolvency and Bankruptcy Code is an "appropriate recourse" (See: RCom calls off merger with Aircel as plan hits 'regulatory' wall).

Aircel said that CIRP is not a proceeding for liquidation."The Company would like to emphasise that CIRP is not a proceeding for liquidation, rather is a process 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," it added.

Aircel said it will strive to provide uninterrupted service connectivity to its customers and sought their support in the "current difficult period".

Aircel was founded some 19 years ago by C Sivasankaran who sold it to Maxis for about $1 billion in 2005. It is likely the first major company in India to initiate bankruptcy proceedings on its own, The Economic Times says. So far, lenders seeking to recover loans have taken the lead on this option.

If the National Company Law Tribunal (NCLT) accepts Aircel's request, it will appoint an interim resolution professional who will have 270 days to find funding and buyers as part of a plan to repay lenders. If that is not agreed, the carrier will be declared bankrupt and sent into liquidation.

Aircel, which had about 80 million subscribers in January, is struggling to maintain operations and retain users. One tower company has switched off some of Aircel's base stations and two telcos have withdrawn interconnectivity over pending dues, the ET report says. Aircel is now trying to work out pacts with other telcos to keep its network running and allow users to port out to other operators.

Aplanned merger with Reliance Communications was scuppered by delays in approvals and a Supreme Court order preventing the sale of Aircel's spectrum in connection with a separate 2G case.

Aircel, which is unlisted, slipped to an operating loss of Rs120 crore in December.