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A failed merger and bailout plan hammered the last nail in Aircel's coffin

The company has decided to go for bankruptcy proceedings in the NCLT, after RCom walked out of merger deal and Maxis gave it a wide berth

Surajeet Das Gupta  |  New Delhi 

A failed merger and bailout plan hammered the last nail in Aircel's coffin

For Anand Krishnan, the promoter of and a majority shareholder in Aircel, it is a tryst he'd like to forget.

On January 25 this year went into a strategic debt restructuring programme with its lenders. Yet, just a few days later, the (RBI) came out with stiff new rules under which existing had to be resolved within six months or be referred to the

Krishnan and Maxis, who had in their talks with bankers, promised to bring in $250 million as fresh equity into the company, were stumped with the new rule and decided to call it a day. currently has a debt of Rs 150 billion.

The problem was simple: with incurring losses of Rs 1-1.5 billion every month, was not ready to fund it for the next six months, during which time the SDR talks would go on. This, even though the lenders had agreed to convert their debt into equity.

The company has now reconstituted the board and has decided to go for bankruptcy proceedings in the NCLT, after its two brave attempts to revive its fortunes did not take off.

The telco has been at the forefront of many investigations -- including one led by the and another by the -- since 2005. There were also allegations from the previous promoter, C Sivasankaran, that the had forced him to sell his stake to The Marans and were chargesheeted by for alleged offences punishable under section 120-B (criminal conspiracy) of IPC and under relevant provisions of the Prevention of Corruption Act.

The ED had also swung into action, filing charges of money laundering against the Marans, while a PIL also challenged Maxis' FDI clearance by former Finance minister P Chidambaram. What's more, Krishnan also failed to comply with a Supreme Court directive calling on him to appear in the lower courts. But with the court clearing the names of the against any wrong-doing on the case, there was major relief for the promoters of Maxis.

Yet despite this rollercoaster ride, Aircel had been able to face the onslaught of competition, with over 83 million subscribers across the country till December, when it had a reasonable subscriber market share of 7.28 per cent. In many circles such as Tamil Nadu, north east as and Jammu & Kashmir, it is a dominant player, despite not having any operations. Yet analysts say that its asset sale, which include and spectrum -- it has already sold its spectrum to Airtel -- is surely not going to fetch much money for its lenders, especially as most of their subscribers are in And there are vendors like which have already gone to court to get their dues paid.

Aircel’s future would have been different had the merger with fructified. The merged entity, which was to be called Aircom and in which it would have had 50 per cent stake, would have surely been a competitive fourth player in the market with a 15 per cent market share. That's pretty close to share enjoyed by The deal would also have helped Aircel to reduce its debt substantially by over Rs 140 billion, leaving only a small portion of its loans to service. But with fears that because of the various cases against the company, the department of telecommunications would not give the green signal for its merger, decide to pull out.

Despite this, Aircel made yet another attempt to survive even in the face of an onslaught in the telecom sector from The company decided to prune its operations and concentrate on only those circles where it is strong and which have scope for growth as a niche player. So on January 31, Aircel shut operations in six circles and concentrated on the remaining sixteen. It also decided to share spectrum with operators and offer the service.

Aircel had also put together a viable strategy to be a fourth, albeit niche player in the market. For four of the circles — Delhi, Mumbai, Karnataka and Andhra Pradesh — it planned to ramp up its market share in the areas in which it operates from 2-4 per cent to 10 per cent through the launch of 4G services.

In the remaining 12 circles which include Tamil Nadu, Assam, the North-east, Jammu and Kashmir, Kolkata, Orissa, Uttar Pradesh East, Rajasthan, Punjab and West Bengal, among others, it already has 10 per cent share in the operational areas in most places, which is a viable business.

Despite all this, the writing was clearly on the wall and it decided to draw the curtains.

First Published: Mon, February 19 2018. 16:12 IST