Mumbai, March 1: Debt-ridden mobile service provider Aircel on Wednesday filed for bankruptcy in the National Company Law Tribunal stating high debt and mounting losses. The telecom operator said that it is facing "troubled times" in "highly financially stressed" industry. The filing for bankruptcy comes following a price war triggered by a new entrant in the telecom sector. Malaysian billionaire T Ananda Krishnan’s mobile firm Aircel blamed the rival telcos and said competition has led the company to troubled times. After failing on all options to revive business, Aircel filed for bankruptcy on Wednesday.

Aircel said that 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. ‘

Aircel blames competition

Aircel in a statement 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. “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,” it said in its statement.

Aircel shuts services in six circles

Aircel had recently shut its services in six circles – Gujarat, Haryana, Himachal Pradesh, Madhya Pradesh, Maharashtra and Uttar Pradesh (West). To recall, Aircel which is 74 per cent 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.

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. Aircel had 85 million subscribers as of end-December and was ranked India’s sixth-largest operator. This, it added, caused significant negative business and reputational impact on the company.

Aircel writes to TRAI

In the last week, Aircel wrote to the Telecom Regulatory Authority of India (Trai) admitting that is undergoing deep financial stress. It told the telecom regulator 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.

TRAI helps Aircel with ‘additional port out codes’

A huge number of subscribers had to face inconvenience due to 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. Aircel subscribers faced difficulties in services and in porting their mobile number to another operator.  This prompted Trai yesterday to issue a directive to Aircel allotting it additional port out codes to enable smooth migration of its subscribers to other networks without changing mobile numbers.

Idea Cellular snaps interconnect services with Aircel

Trouble mounted for Aircel as Idea Cellular in early February snapped interconnect services with the telco. Idea cited that it has ended the deal due to non-payment of dues. Meanwhile, reports state that 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.

Aircel in more trouble

In its statement today, Aircel stressed that the Corporate Insolvency Resolution Process 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 had sought co-operation from vendors and channels partners, while the IBC process is underway, urging them to continue their services for its ongoing business. “The company would like to communicate to all the customers that it would strive hard to provide uninterrupted service connectivity to them and appeals to them for their support during the current difficult period,” Aircel added.

New entrant Reliance Jio created a storm in telecom sector

The entry of Reliance Jio and its disruptive offerings since September 2017 forced mobile operators to respond with matching tariffs. Jio’s entry in the telecom sector hurted finances of rival telcos and increased their debt burden. Billionaire Mukesh Ambani in December 2017 stepped in to bail out his brother Anil Ambani’s debt-ridden Reliance Communications by acquiring spectrum, tower, optical fibre network and other wireless assets.

Aircel- that has a debt of Rs 15,500 crore was unable to find a way to revive its business and retain its customers in this highly competitive environment. If reports are to be believed, Aircel shutting down will impact tower firms, vendors, distributors and 500 employees associated with the operator. To make things even worse, Aircel’s parent company also backed out of infusing funds into the struggling telecom player. The recent spate of consolidation is expected to leave the Indian mobile market with just about four operators as Vodafone and Idea Cellular are in the process of merging their businesses.

(The above story first appeared on LatestLY on Mar 01, 2018 12:05 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).