Ailing GSM telecom service provider Aircel has delayed payment of interest on its debt repayment obligations on account of its weak liquidity position, rating agency CARE said, which also downgraded the telco to a default (D) grade. The telco has long-term bank loans of Rs. 174.79 billion or $2.7 billion, the agency said.
Various media reports said that Aircel is talking to its lenders for a strategic debt restructuring (SDR).
“The company has delayed in repayment of interest on its debt obligations on account of its weak liquidity position as a result of its continuing weak operational performance in the hyper-competitive telecom sector…the ability of Aircel to improve its operational performance in the current industry scenario will be critical and will continue to be a key rating monitor,” CARE Ratings said in a note.
The agency further added that the severe competition in the sector post Reliance Jio Infocomm’s (Jio) entry has led to drop in Aircel’s average revenue per user (ARPU) and its operating margins have been on a downward trend, leading to deterioration in its financial risk profile.
Aircel is currently the sixth-ranked mobile carrier in the country by subscribers. Its subscriber base showed a year-on-year growth of 6% and had around 89 million users at September end.
The telecom operator’s loss in 2016 calendar year doubled to Rs. 4,319 crore, as compared to a loss of Rs. 2,215 crore in previous year.
Malaysia’s Maxis Communications Bhd owns 74% stake in Aircel, which had gotten into an agreement with Reliance Communications (RCom) to combine operations, but the deal fell apart last month due to various hurdles.
The agency said that its next set of ratings on Aircel will depend on the telco’s ability to service its debt obligations in a timely manner, finalisation of its new business plan after discussions with the lenders and any change in regulations affecting the business and the telecom industry shall be the key rating sensitivities.