India's 6th largest tele firm Aircel files for bankruptcy: 10 points you should know

As the price war in the telecom sector gets intense, another weak player loses ground. The country's sixth largest telecom operator Aircel filed for bankruptcy on Wednesday at NCLT in Mumbai. 

Aircel along with its units - Aircel Cellular and Dishnet Wireless - on Wednesday filed for bankruptcy in the National Companies Law Tribunal (NCLT) in Mumbai due to neck and neck competition in the feild. 

With this, Aircel now has become the the fourth telecom who took the exit route after the entry of Mukesh Ambani owned Reliance Jio. 

Below we have listed 10 points that you should know about the matter. 

1.  T Ananda Krishnan led Aircel, along with Aircel Cellular and Dishnet Wireless, filed for bankruptcy on Wednesday after it failed to reach an agreement with a consortium of lenders led by State Bank of India (SBI) on how to settle the Rs 17,479 crore debt.

2. The company said in a statement that is facing troubled times owing to intense competition and a disruptive entry of a new player, among other things. The company in 2017 had planned to merge itself with Anil Ambani's RCom but failed due to valuation issues.

3. According to a ratings data on the Icra website, the company has liabilities worth Rs 17,479 crore to banks. The company was downgraded to the lowest grade D after it failed to meet commitments to its lenders.

4. In its statement, Aircel emphasised that insolvency is not a proceeding for liquidation and done to "find best possible resolution for the current situation and that would be in the best interest of everyone (vendors, distributors, employees, etc.) to protect and preserve the value of the company and manage the operations".

5. The operator said that despite discussions and the invoking of a Strategic Debt Restructuring scheme in January 2018 pursuant to the then guideline of the Reserve Bank of India (RBI), no agreement could be reached.

6. Kartik Srinivasan, head of financial ratings at Icra, told DNA Money, "Banks will have to make provisions for the account in the fourth quarter. With the company filing for bankruptcy, it is not clear what would be the quantum of provisioning that banks are required to make."

7. Icra had downgraded the company in November 2017 to the lowest rating at D, saying that rating revision factors in the delays in debt servicing by the company based on public information. The rating was already under 'Issuer Not Cooperating' category, and Icra has been consistently following up with the company, but the remained non cooperative, according to the rating agency.

8. Aircel has established pan-India operations in the mobile services with 89.9 million subscribers as on July 31, 2017, with strong presence in its four circles – Tamil Nadu, Assam, North East and Jammu & Kashmir.

9. "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. This has caused significant negative business and reputational impact on the company," said the operator.

10. In its letter to TRAI last week, the company said it has been severely impacted by a major infrastructure provider shutting off as much as a third of its total sites in different circles or telecom service areas across the country.