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"AIRCEL -THE CONCLUSION"

Research · March 2018

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Krithikaa Murugesan Akhila Vijayakumar

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 “AIRCEL - THE CONCLUSION”

ABSTRACT:

Aircel was an Indian mobile network operator whose headquarters is in Gurgaon. The
company offers voice and 2G and 3G data services and commenced operations in Tamil
Nadu in 1999. Aircel is a pan-India 2G operator with 3G spectrums in 13 circles and credited
with the fastest 3G roll out ever in the Indian telecom space. Aircel provides 3G services in
Andhra Pradesh, Assam, Bihar & Jharkhand, Chennai, Jammu & Kashmir, Karnataka,
Kerala, Kolkata, North East, Orissa, Punjab, Tamil Nadu, UP East and West Bengal. From
basic services to SMS era to the one of an always-on 4G mobile Internet, the company has
faced a lot of obstacles as well as opportunities jumping between GSM and CDMA telephony
to LTE. But in the year 2018 filed for bankruptcy at NCLT. This case covers the highlights of
the journey of Aircel and the factors that have led to its bankruptcy.

INTRODUCTION

Aircel is an Indian mobile network operator headquartered in Gurgaon that offers

voice and 2G and 3G data services and commenced operations in Tamil Nadu in 1999. The
Aircel Group is a result of alliance between Maxis Communications Berhad of Malaysia
(74% equity) and Sindya Securities & Investments Private Limited (26% equity). The Aircel
Group, formed in 1994, offers affordable and outstanding mobile services to a vast subscriber
base in India.
Aircel commenced operations in 1999. In the first decade of operations, they started
building their foundations in the southern parts of the country, and soon they grew as the
regional market leaders. In addition to the leadership position in Tamil Nadu, Aircel met with
extraordinary success in the Eastern frontier circles. Aircel also worked their way out and
managed to emerge as the market leaders in Assam and North Eastern states within 18
months of operations. During this period, the company gained a secure position in 10 circles,
to provide better access to the customers.
Aircel is a pan-India 2G operator with 3G spectrums in 13 circles and credited with
the fastest 3G services in the Indian telecom industry. They provide 3G services in Andhra
Pradesh, Assam, Bihar & Jharkhand, Chennai, Jammu & Kashmir, Karnataka, Kerala,
Kolkata, North East, Orissa, Punjab, Tamil Nadu, UP East and West Bengal. Aircel has
always been at the position of introducing innovative and reasonably priced products and
services for its customers. All offerings are encouraging and at the same time unique as
Aircel continue to re-invent the products and services constantly to deliver the best services
to the customers.

COMPANY PROFILE:

Parent Company Maxis Communications, Apollo Hospital

Category Mobile service provider

Sector Telecommunication

Tagline/ Slogans Your World of possibilities

1. Reliance Jio
2. Airtel
3. Idea
Competitors 3. Vodafone
4. Tata Docomo
5. Reliance Communications
6. BSNL
7. Tata Indicom
1. Aircel is one of the largest telecom companies
in India with 90 million subscribers
2. Aircel has a strong presence in states like
Tamil Nadu, North Eastern states in India
Strengths 3. The company focused on good advertising
and marketing
4. The company sponsored for events and IPL
sports teams increased brand visibility
5. Apart from mobile services, Aircel offers
broadband services
1. Intense competition means limited market
Weaknesses share of Aircel
2. Price wars means less profitability and lesser
margins
1. Aircel can tap expanding cellular market in
India
Opportunities 2. Latest and low cost technologies can be
adopted to increase business
3. Tie-up with other brands and expansion to
newer geographies
1. Competitors low price offering can reduce
margins of Aircel
Threats
2. Saturation point in Basic telephony service
3. Mobile Number Portability to other networks
can reduce subscriber base
AIRCEL’S JOURNEY:

 India's telecom policy and licensing regulations have gone regular revisions ever since
liberalisation began tentatively in 1994: from basic voice services and the SMS-era to
the one of an always-on 4G mobile Internet, the industry has come a long way,
jumping over technological battles between GSM and CDMA telephony to LTE.
 In 2012, as a part of a major re-organization in its operations, the company brought
down its operations in five telecom circles, namely Madhya Pradesh, Gujarat,
Haryana, Kerala and Punjab.
 In April 2015, Aircel re-launched its service in Kerala.
 On 14 September 2016, Reliance Communications and Aircel announced the merger
of their mobile network operations. Following the merger, the joint entity was
expected to become India's fourth largest telecom operator in term of consumer base
and revenues.
 A year later, however, both the companies called off the deal citing regulatory and
legal issues and the intense competition in India’s telecom market has shaken the
operators including Aircel, which is losing customers, facing partial network
shutdowns and going through a money crisis.
 Nearly nine lakh customers across India on 21 February 2018 tried to port their
numbers after facing frequent network issues and due to the reports of the company
facing financial problems. When rumours spread in Facebook and Twitter regarding
the company shutting down, Aircel clarified on social media that it is not closing its
services and that users will be notified in advance of any such cases.
 On 28 February 2018 Aircel filed for bankruptcy at NCLT.

With a customer base of 5.6 crore and a debt burden of Rs 15,500 crore, Aircel, the
beleaguered telecom operator filing for bankruptcy, was an least expected event in the
business history. The only things that have not changed over the decades are the regulatory
uncertainty and policy manipulations. The story of Aircel is one of the stories that seem to
have faced a lot of obstacles in its business cycle, along with the plots of politics, policy and
presumptions.
For anyone following telecom regulation, it was clear that sooner or later, the industry
would combine, and the weaker players will sell out to the stronger ones or merge together.
 The problem is that everyone prioritised their needs that is to store up spectrum, drive
valuations based on that and borrow from banks at lower costs. This scenario blew up when
the Comptroller and Auditor General (CAG) revealed an estimated revenue loss figure or Rs
176,000 crore, after which telecom companies were stuck with a huge pile of debt.

Anil Ambani-controlled Reliance Communications (RCom) and Aircel called off a

planned merger. But the timing was a little worse because Mukesh Ambani had launched his
Reliance Jio in the Digital Age. Jio is being blamed by Aircel for its issues, which in turn
were based on presumptions that it would face no problems from regulators or bankers.
Aircel is the fourth telecom firm to wind up after billionaire Mukesh Ambani-led Reliance Jio
debuted in September 2016, unleashing a price war in the sector with its free voice calls and
data.

The Rs 15,500-crore debt laden telecom operator with 85 million subscribers recently
wound up services in six circles - Gujarat, Haryana, Himachal Pradesh, Madhya Pradesh,
Maharashtra and Uttar Pradesh (West) with effect from January 31, 2018 - to improve focus
on better the performing ones. Many postpaid and prepaid subscribers have been facing
inconveniences due to disorder of services in the remaining licensed service areas like
Andhra Pradesh, Assam, Bihar, Delhi, Jammu & Kashmir, Karnataka, Kerala, Kolkata,
Mumbai, North East, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh (East) and West
Bengal. Further, there have been complaints of subscribers facing difficulties in porting their
mobile number to other service provider. The Telecom Regulatory Authority of India (TRAI)
will soon issue direction to troubled Aircel to keep service quality in check through intra
circle roaming pacts, and grant it additional time and porting codes to enable its customers
opt out to other networks. We could call Aircel's bankruptcy the chronicle of a death, as it
fights to survive, moving from regulators to banks to bankruptcy court, even as RCom
desperately sheds wireless assets to elder brother Mukesh's Jio and be a humble player in an
exploding industry. Bankers who lent to them were guided by poor perspective on industry
details. Banks that have no clue on regulation or technology curves treat money as a
commodity. Jio stole their thunder with an asset-light strategy that focused on excellent
timing. India's smart phone penetration is at roughly 35 percent with mobile phone
connections having crossed one billion last year. Jio is focusing on services including content
and a range of services and apps.

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