Aircel, another name among India’s smallest private telecom operators, is reportedly on the verge of bankruptcy due to lack of funds and operational issues. Earlier this week, the company CEO wrote an email to over 5,000 Aircel employees asking them to be ready to face difficult times.
“We have had no funding for some time and have been dependent on cash generation from our current business operations,” Chief Executive Officer Kaizad Heerjee said, as per the Economic Times.
The ongoing issue
Aircel customers have recently been facing network issues like call drops and signal loss. This was due to a legal tiff between the tower vendors and the operator leading to tower vendors switching off services across India in insurgency. Also, customers are not able to port to other operators either.
“There is some legal issue with one of the telecom tower companies. Due to this, the network was cut by the tower company across India. This created a network problem and mayhem in the market,” company’s SBU Head, K Sankara Narayana told BusinessLine.
"Aircel’s infrastructure could not handle such a large number of requests to port out," he said on the porting issue.
The customers turned to social media to raise their concerns on this, and the company kept replying with – “We regret to inform you that it will take some time to provide better service in that particular area due to the technical issue. So, requesting you to cooperate with us. We sincerely apologise for the inconvenience caused.”
How did it start?
It started when Idea Cellular broke off interconnection with Aircel due to non-payment of dues. The struggling operator failed to clear the pending dues since November 2017.
According to the report by ET, Aircel had reported a quarterly profit of Rs 120 crore in July 2016, before Reliance Jio entered the market. Post Jio’s entry, the company took a downhill tumble and recorded an operational loss of Rs 120 crore in December 2017.
Competition is hurting small telecom operators
Smaller operators like Telenor and Aircel are badly hurt by the fierce competition in the telecom sector after Jio’s rollout. Not just small telcos, but the big ones like Airtel and Vodafone also went through serious damage. Telecom sector recorded huge job loss and debt in the sector is estimated to reach Rs 4.8 lakh at the end of FY18, as per ICRA estimates.
The company CEO also mentioned the impact of competition in the email. “As competition remains intense in a hugely financial stressed market, we too are being impacted… The company expects things to get even more difficult in coming days,” he wrote.
So, is Aircel shutting down?
Herjee in his e-mail said – “The board will be reviewing and evaluating the options for the company, indicating that it may file for bankruptcy. As of now, Aircel is consulting all its stakeholders and lenders to determine the roadmap.”
Economic Times report quoted company officials saying that Aircel was approaching the National Company Law Tribunal (NCLT) to file for bankruptcy proceedings.
Also, Herjee in the email to employees said, “We have had no funding for some time and have been dependent on cash generation from our current business operations.”
The company has been in negotiations with lenders since September but has failed to figure out a plan to repay its Rs 15,500 crore debt. Even RBI refused all debt restructure schemes in favour of Insolvency & Bankruptcy Code.
When asked on Twitter by a user, Aircel replied, "Please be informed that we are not at all closing our services. Also, we value our customers and will update all of you in advance if any such thing happens."
We haven't heard any official announcement about this yet, but it is likely that the financial crisis and cutthroat competition will lead towards potential closure.