Road to resolution: Potential bidders for Aircel could buy company in parts

Aircel has a debt of nearly Rs 200 billion and attempts to restructure the loan did not come though, forcing the company to go to the NCLT in February

Potential bidders for cash-strapped Aircel have been offered the option of buying assets of the company instead of looking at acquiring the firm.

The specific assets for which potential bidders like Airtel and Reliance Jio, as well as a leading private equity fund, have shown an interest include its optic fibre and enterprise business. Both the companies, however, declined to comment on the issue and the final bids have not come in.   

Under Regulation 29 of the Insolvency and Bankruptcy Board of India (IBBI), the “resolution professional may sell unencumbered assets of the corporate debtor, other than the ordinary course of business if he is of the opinion that such a sale will lead to better realisation of value”.  

However, there is a rider: The book value of all assets sold during the resolution process should not exceed 10 per cent of the “claims admitted by the interim resolution professional”. A bona fide purchaser under this regulation will get a free and marketable title to the assets.    

According to executives whose firms are looking to bid for the company, Aircel has an underground fibre network of more than 15,000 km, especially in Jammu & Kashmir and the Northeast, where laying fibre is tough and time-consuming because of the terrain. It has a vibrant enterprise business with some key clients.

Aircel has a debt of nearly Rs 200 billion and attempts to restructure the loan did not come though, forcing the company to go to the National Company Law Tribunal in February. 

The firm had made an aborted attempt to merge with Reliance Communications. This would have substantially reduced its debt. Malaysian tycoon Anand Krishnan had invested over $7 billion through his company Maxis. However, he decided not to put in any more money in the telco.  

The fibre assets could fetch an attractive price because telcos are investing large sums to backhaul their towers with fibre instead of microwave communication. With only 25 per cent of the over 561,000 towers fibre-connected, there is a huge need to for laying fibre. Also with right of way costs (the money paid to municipalities to get permission to lay the fibre underground) hitting the roof and with municipalities chary of giving permission, it is much more attractive to buy the fibre on the ground.

WHAT NEXT

• Bidders for Aircel can buy the various assets of the company, which include its fibre and enterprise business 

• Under regulation assets of the firm can be sold but their book value should not constitute over  10 % of the total claims admitted by the resolution professional    

• Aircel has 15,000 kms of fibre, which could fetch a premium because of high demand 

• It's mobile business has virtually come to a standstill with subscribers porting out to other telcos.  

 

Also with Airtel and Jio laying fibre-to-home connectivity across the country, the demand for fibre will increase. Estimates by telcos say that laying a kilometre of fibre could cost Rs 3-3.3 million.

Potential bidders say there is not much value in the mobile services business because the subscriber base of telcos has got eroded dramatically, with the Telecom Regulatory Authority of India no longer reporting their numbers. Also with most telcos having enough spectrum and more to be on offer in auctions, there is no value for the remaining spectrum.