KUALA LUMPUR: Billionaire T. Ananda Krishnan’s Aircel Ltd.filed for bankruptcy protection from creditors, making the phone operator the latest casualty in India’s campaign to go after delinquent borrowers.
The unit of Krishnan’s Maxis Communications Bhd. submitted its application under India’s Insolvency and Bankruptcy Code, Aircel said in a Twitter post on Wednesday.
The company 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,” it said.
It’s the first time a major company made such a move on its own in India because banks had previously initiated bankruptcy proceedings.
For Krishnan, Malaysia’s third-richest man, the step marks the first in what could lead to the end for the 19-year operator, which borrowed beyond its means over the years to survive in India’s cut-throat telecom industry but never gained enough scale.
The filing also sets the stage for Aircel to join the scores of companies that have entered insolvency proceedings since 2016 after India’s government overhauled its bankruptcy law and stepped up efforts to clean up its banking sector’s bad debts.
Krishan entered India’s phone market, the world’s second largest by users, in 2005 by buying a majority stake of Aircel for about $1 billion and spent billions more trying to build the business.
In 2011, it was one of the two operators to introduce Apple’s iPhone 4 in India. But the appeal of having more customers than the populations of various countries lured so many companies that India morphed into one of the world’s mostcrowded phone markets -- at one point having a dozen players.
Carriers charged some of the lowest phone rates in the world, resulting in smaller operators to either merge or get out.
Competition intensified in 2016, when India’s richest man stormed into the market with free calls.
For Aircel, which ranked as the nation’s sixth-largest operator with 85 million subscribers as of end-December, it found a merger partner in billionaire Anil Ambani’s Reliance Communications Ltd. only to see the deal collapse in October.
Aircel also hit a setback in January 2017, when India’s highest court barred the company from selling or leasing its airwaves in a broader graft lawsuit.
Aircel had total debts of 438.3 billion rupees ($6.7 billion) as of the end of March 2016, the latest period such figures were publicly available.
Should the Indian tribunal accept Aircel’s request, the company will be placed under a court-appointed insolvency resolution professional who will have as long as 270 days to work out a repayment plan, according to the Insolvency & Bankruptcy Code 2016.
If no plan is agreed on by the deadline, the law mandates the company be declared bankrupt and thrown into liquidation.
The Indian central bank decided in February to scrap all alternative debt-resolution mechanisms, effectively forcing Aircel to go down the bankruptcy path either on its own or pushed on by its bankers. - Bloomberg
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