Malaysian billionaire T Ananda Krishnan's mobile firm Aircel on Wednesday filed for bankruptcy protection from creditors, saying high debt and mounting losses, following a price war triggered by a new entrant, have led the company to troubled times.
Aircel, 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.
After failing on all options, it filed for bankruptcy with the National Company Law Tribunal (NCLT), Mumbai.
In a statement, 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.
"The Board of Directors of the Corporate Debtor on Wednesday 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.
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.
"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 said.
This, it added, caused significant negative business and reputational impact on the company.
Aircel had recently shut its services in six circles - Gujarat, Haryana, Himachal Pradesh, Madhya Pradesh, Maharashtra and Uttar Pradesh (West).
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.
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.
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.
Adding to its woes, 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.
Aircel statement on Wednesday 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.
The company 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.
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.
Telenor agreed to sell its India business to Bharti Airtel, and the Sunil Mittal-owned company has also announced that it will acquire the consumer mobile business of Tata Teleservices on debt-free cash-free basis.
In December 2017, billionaire Mukesh Ambani stepped in to bail out younger brother Anil Ambani's debt-ridden Reliance Communications by acquiring spectrum, tower, optical fibre network and other wireless assets.
The 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.