Bankrupt Indian telco Aircel gets a lifeline, creditors get a haircut

bankrupt Aircel haircut
Photo by Eugenio Marongiu

UV Asset Reconstruction Co. Ltd (UVARCL), the asset reconstruction company is set to take over defunct Aircel’s assets following an approval from India’s National Company Law Tribunal (NCLT) on the telco’s insolvency resolution plan. 

With the latest nod, Aircel’s creditors would now be able to recover their dues about Rs 2,000 crore-Rs 3,000 crore ($267 million-$400 million), albeit with a massive haircut. The initial plan was to recover Rs 5000 crore -Rs 6000 crore ($667million-$800 million) against Rs 20,000 crore ($2.67 billion).

Aircel owes about Rs 20,000 crore ($2.67 billion) to around 12 financial institutions, including State Bank of India, Bank of Baroda, Punjab National Bank, China Development Bank Corp., and Canara Bank. 

UVARCL, set up in 2007, will now have to take approvals from India’s Supreme Court and the Department of Telecommunications (DoT) to take over the control of Aircel assets from Deloitte, which is the resolution professional (RP).

GSM telecom operator Aircel, owned by Malaysia’s Maxis, had filed for bankruptcy in March 2018 after failing to service the debt of Rs 20,000 crore ($2.67 billion). It had stopped operations in the same month after Maxis decided against infusing additional funds into the company. 

Aircel suffered immensely due to the entry of Mukesh Ambani-led Reliance Jio, which triggered a price war through its cheap 4G data and calling services in September 2016.

The asset reconstruction company, which counts Central Bank of India, Bank of Maharashtra, Union Bank of India, Bank of India, United Bank of India, Allahabad Bank, United India Insurance Co., and National Insurance Co. as stakeholders, had placed bids for Aircel’s mobile business only. It can now submit a bid for the telco’s remaining businesses, including bulk SMS and enterprise businesses.

UVARCL, however, will face legal challenges in India, especially on around Aircel’s spectrum. The Department of Telecommunications already filed claims worth Rs 10,000 crore ($1.3 billion) on Aircel’s spectrum saying that it belongs to the Indian government and should be returned in the absence of any payments towards spectrum-related dues.

Media reports said that the NCLT rejected the DoT’s argument but the later may challenge the order in an appellate court and may take it up to the Supreme Court for non-payment of spectrum dues.

The NCLT order, if unchallenged, be implemented immediately, reports added.

The telecom operator has 4G spectrum in the 900 Mhz, 1800 Mhz and 2100Mhz bands in the Andhra Pradesh, Delhi, Karnataka, Mumbai, Rajasthan and Tamil Nadu circles. The spectrum license is valid until 2026. It also has nearly 14,500 km of optical fibre network across the country.

Aircel had previously told the NCLT that the spectrum was worth Rs 1,100-2,000 crore ($147million-$267 million).

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