Aircel, the sixth-ranked mobile carrier in the country by subscribers, has delayed payment of interest on its debt obligations on account of its "weak liquidity position," CARE said in a Nov. 16 note.
Analysts feel shutting down the business using the bankruptcy route would invoke the bank guarantees of Aircel's Malaysian parent company Maxis.
"Reliance Communications Limited's (Rcom's) cancellation of the merger agreement of its mobile business with Aircel Limited has no impact on Rcom's Ca corporate family and senior secured bond ratings. The ratings outlook remains negative," Moody's said in a statement.
The endeavour remains to pare the debt by December end but by March 2018, the company would focus to reduce Rs 25,000 core out of the overall debt, said Punit Garg, ED, Reliance Communication.
Rcom and Aircel Limited had signed binding agreements in September 2016 for the merger of Rcom's mobile businesses with Aircel
Aircel, which is wholly owned subsidiary of Maxis, has a total debt of Rs 16,000 crore out of which Rs 12,000 crore is Indian debt.
This leads to the government losing out Rs12,229.24 crore as payment from spectrum usage charges and interest. These charges are computed by using telecom companies’ revenue as the base. On the basis of this report government has once again appointed special auditors to check irregularities in telecom company’s accounts.
Total mobile customer base of five COAI members that include Aircel and Telenor declined by 37.74 lakh to 82.6 crore in July from 83 crore at the end of June.
Indian telecom companies are seeking mergers and acquisitions to beat tough competition.
The Comptroller and Auditor General (CAG), in its latest report tabled in Parliament today, said its audit indicated "total understatement of adjusted gross revenue (AGR) of Rs 61,064.56 crore" by six operators.
On the last date of hearing, the CBI had told the court that more steps were needed to be taken to secure the presence of Krishnan and Marshall, who were charge-sheeted along with former Telecom Minister Dayanidhi Maran and his brother Kalanithi, in the case.
RCom, in September last year, had announced it will merge its wireless telecom business with smaller rival Aircel to create the country's fourth-biggest mobile phone operator.
Moreover, the RJio's extended free services for prime members till June, may also continue to keep the performance of telecom companies muted for the first quarter (April-June) of the current fiscal, according to ICICI Securities' latest earnings preview of the sector.
Telecom operators Aircel, Reliance Communications and Airtel did not meet regulator TRAI's various quality norms for 2G services in multiple licence areas for the quarter ended December 2016.
Bharti Airtel led the subscriber growth by adding 1.25 million new mobile customers, followed by Idea Cellular (1.21 million), Vodafone (0.79 million) and Aircel (10,000 new customers).
Dark clouds of job cuts loom over the telecom sector. The risk running with mergers is that as many as 10,000 employees may lose their jobs over the next year.
Reliance Communications today said it has received approval of the Competition Commission of India (CCI) for the demerger of its wireless division into Aircel Ltd and Dishnet Wireless Ltd.
"Reliance Communications has received approval of the Securities and Exchange Board of India (SEBI), BSE and NSE for the proposed scheme of arrangement for demerger of the wireless division of the company into Aircel Ltd and Dishnet Wireless Ltd," the company said in a regulatory filing.
The company has filed an application with National Company Law Tribunal (NCLT), Mumbai Bench, for approval of the said scheme
Regulator TRAI today stressed the need to identify bottlenecks that make the functioning of telecom business difficult in India and listed out processes such as licence acquisition, spectrum allotment and mergers that can be reviewed.
Speaking to CNBC-TV18, Manisha Girotra of Moelis India said that India urgently needs capital and restructuring of stressed assets should be undertaken through any means possible.
Ample liquidity in the market could help it go up further but one needs be cautious of the risk-reward balance from a fundamental perspective, says Sanjeev Prasad, Senior Executive Director & Co-Head, Kotak Institutional Equities.
The deal is likely to be speeded up by the truce that was announced on Tuesday between Tata Sons and Japanese telecom giant NTT Docomo in the long-standing USD 1.17-billion dispute over their failed joint venture.
According to a GSMA report, India‘s telecom sector directly employs 2.2 million people and 1.8 million indirectly. Consolidation in the sector could cause nearly a third of these jobs to be shed.
On one hand, these mergers could help bigger incumbents increase their subscriber base, and provide competitive pricing but on the other hand, this is also likely to wipe off 10-15 percent of jobs in the telecom space, reports an article in Business Standard.