Aircel files for bankruptcy under insolvency code: 10 points

Know the top 10 updates on Aircel bankruptcy.

Aircel files for bankruptcy under insolvency code: 10 points

New Delhi: Indian mobile carrier Aircel Ltd backed by Malaysian billionaire T Ananda Krishnan has filed for bankruptcy saying high debt and mounting losses, following a price war triggered by a new entrant, have led the company to troubled times.

Krishnan, Malaysia's third-richest man, had entered India in 2005 when his firm bought a majority stake in Aircel for about USD 1 billion and infused money to build the business.

Here are the top 10 updates in this story

  1. Aircel has filed an application under Section 10 of the Insolvency and Bankruptcy Code, 2016 for undertaking Corporate Insolvency Resolution Process (CIRP) for Aircel Cellular Limited, Dishnet Wireless Limited, and Aircel Limited.
  2. Aircel, 74 percent owned by Malaysia's Maxis Communications Bhd, first tried a merger with Reliance Communications Ltd but the plan failed late last year due to regulatory and legal uncertainties. Later, it tried to unsuccessfully restructure its Rs 15,500 crore debt. After failing on all options, it filed for bankruptcy with the National Company Law Tribunal (NCLT), Mumbai.
  3. A Bloomberg report said that Krishnan was poised to lose a total of about $7 billion, marking his biggest ever hit on a soured investment, as a result of the bankruptcy filing. Maxis, a holding company for some of Krishnan`s telecom ventures, has made about $3.4 billion of shareholder advances to Aircel that it won`t be able recoup. Maxis also stand to lose around $1.2 billion it injected in return for common stock and subscription to $1.6 billion of redeemable preference shares in the Indian mobile carrier, the report said.
  4. Aircel said that intense competition following the disruptive entry of a new player, legal and regulatory challenges, high level of unsustainable debt and increased losses had together caused significant negative business and reputational impact on the company.
  5. Aircel had 85 million subscribers as of end-December and was ranked India's sixth-largest operator.
  6. Aircel had recently shut its services in six circles - Gujarat, Haryana, Himachal Pradesh, Madhya Pradesh, Maharashtra and Uttar Pradesh (West).
  7. The company, last week, wrote to the Telecom Regulatory Authority of India (Trai) admitting that is undergoing "deep financial stress" and that it has been severely impacted by a major infrastructure provider GTL Infra shutting off as much as a third of its total sites in different circles or telecom service areas across the country.
  8. The disruption of its services in the licensed service areas -- Andhra Pradesh, Assam, Bihar, Delhi, Jammu & Kashmir, Karnataka, Kerala, Kolkata, Mumbai, North East, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh (East) and West Bengal, had inconvenienced a large number of subscribers, who faced difficulties in services and in porting their mobile number to another operator.
  9. Trai has issued a directive to Aircel allotting it additional port out codes to enable smooth migration of its subscribers to other networks without changing mobile numbers.
  10. Idea Cellular in early February snapped interconnect services with Aircel, citing non-payment of dues. Vodafone too is learnt to have suspended most inter-circle interconnect services like messaging, local and international calling facility with Aircel on account of outstanding dues.

The entry of aggressive newcomer Reliance Jio and its disruptive offerings have forced mobile operators to respond with matching tariffs, hurting their financials and increasing their debt burden.

Many of the smaller operators have succumbed to market pressure and opted to merge or get acquired by larger players.

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