Aircel seeks to record operating break-even through restructuring

From about 5 circles, number has now gone to 7 and target is to reach 9 or 10 circles by end of this fiscal

Mobile operator Aircel has devised a restructuring programme to record break-even, against its current operating losses of Rs 250 crore a month, vital to rework its debt.

Compared with five circles recording operating profits earlier, the number of these circles has risen to seven. The operator plans to have nine-10 such circles by the end of this financial year. The company has licences in 23 circles across the country.

Under the new plan, the company has merged its network and operations divisions to ensure the company doesn’t concentrate on different kinds of customers. Earlier, the company had planned to spin off these divisions into separate companies once the details of the government’s infrastructure sharing norms were clear, as it sought to share its network with other telecom operators, creating an additional revenue stream. It also planned to have another division that would concentrate on services and consumers.

The company has also implemented a ‘clustering’ strategy in circles where it has 1,800 MHz of spectrum. Instead of running its own network and operations across the circle, it is going on its own only in a few key cities and districts; for other areas within these circles, it has signed intra-circle roaming agreements with other operators.

For instance, in Rajasthan, it runs its own operations in Jaipur, Jodhpur and Bikaner, while for other areas in the state, it has intra-circle roaming agreements. A similar model has also been worked out for Punjab, Andhra Pradesh and Karnataka. This has helped the company reduce overhead costs substantially.

The company’s strategy also involves renegotiating terms with its numerous vendors to help it cut costs.

Earlier, the company had come under the Central Bureau of Investigation scanner and had postponed the launch of fourth-generation (4G) services, earlier scheduled for 2012-end, in the eight circles where it has spectrum.

Aircel had appointed SBI Capital to refinance or reschedule part of its Rs 19,500-crore loan from a consortium of lenders led by State Bank of India. The loan was aimed at building its network and paying for expensive third-generation (3G) and 4G spectrum. The company had spent Rs 13,500 crore on acquiring spectrum — Rs 10,000 crore for 3G spectrum and Rs 3,500 crore for broadband wireless access.

For the first half of 2012, Aircel had posted a loss of Rs 724 crore and revenue of Rs 3,898 crore. In 2011, it had recorded a massive consolidated net loss of Rs 6,247 crore on a revenue of Rs 6,651 crore, compared with a net loss of Rs 2,868 crore and a revenue of Rs 7,642 crore in 2010.

ROAD MAP

* Increase profitable service circles to nine-10 by the end of this financial year from seven now

* Not concentrate on various kinds of customers through separate divisions

* Renegotiate terms with vendors to help cut costs

* Follow a clustering strategy in the 1,800-MHz circles, in which Aircel will have its own network only in a few areas; for others, it has signed intra-circle roaming pacts with other operators