Aircel Mostly Blamed Jio For Its Bankruptcy

Aircel, once among the top 6 telecom services providers in India, has filed for bankruptcy. In a statement on Wednesday the firm and its two other business units informed that they have approached National Company Law Tribunal and have filed an application under Section 10 of the Insolvency and Bankruptcy Code, 2016 (“Code”) for undertaking Corporate Insolvency Resolution Process (“CIRP”), because of stressed financial issues.

Aircel is perhaps the first telecom operator in India to have filed for bankruptcy on its own. While there are multiple reasons pushing the smaller telcos to shut down their businesses, entry of Jio and the resultant competition in the market, are the major ones.

Even Aircel admits that and stated it officially too!

“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 in the statement without explicitly naming Jio. “This has caused significant negative business and reputational impact on the Company,” it added.

Post the entry of Reliance Jio in to the Indian telecom space, almost all the incumbent operators – big and small – are going through troubled times. So much so, that many operators have just vanished from the business – some by shutting shop and others by merging with comparatively stronger rivals.

Telenor India, MTS, TTSL and RCom are some examples who have ceased their own operations. Aircel is the latest name to join the list.

Besides these smaller ones, even the big ones faced the heat. India’s second and third largest operators – Vodafone and Idea Cellular – are in the middle of merger talks, and the closure of the merger is expected in the second quarter of 2018.

Aircel, majorly controlled by the Maxis Group, had first stopped operations in six circles in December last year. Then in February this year, Idea Cellular snapped the IUC pact with Aircel citing non-payment of dues. This created massive inconvenience for the Aircel customers. This was followed with similar actions by Vodafone. The inconvenience for its customers aggravated when GTL Infra, Aircel’s tower partner, switched multiple sites because of old debts and non payment of dues.

Aircel had no option but to inform TRAI that the company is shutting down its businesses in other 16 circles as well, and had requested the regulator to facilitate MNP for its customers.

The insolvency filing, the company stated, was the last option as its plan to restructure its debt by financing another Rs 15,000 crore failed after multiple talks with shareholders and lenders. The filing in NCLT was also triggered by the RBI’s recent directive to scrap debt revamp schemes in favour of the Insolvency & Bankruptcy Code.

“No agreement could be reached. Under current circumstances, especially after the 12 February 2018 RBI guidelines, the company believes resolution process under the Code is an appropriate recourse,” the company, majority-owned by Malaysia’s Maxis, said in the statement.

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