CARE Ratings on Thursday downgraded ratings for Aircel’s long-term loans to “D”, default grade, from “BB+” on account of the delays in servicing debt obligations. “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.” said the agency. The loan account of the operator, majority owned by Malaysia’s Maxis, has been categorised ‘SMA1’ by State Bank of India and some of its other lenders for failing to service its loans on time. The ratings are based on a consolidated view on the credit risk profiles of Aircel and its wholly-owned subsidiaries. As of March 31, Aircel and its subsidiaries are present in 22 circles, with a total subscriber base of 90.9 million.
The Indian telecom sector is witnessing intense competition with the entry of Reliance Industries-promoted Jio. After Reliance Communications, Aircel has become the second notable telco to have defaulted on its debt repayment obligations, underlining the precarious financial health of the smaller mobile phones operators hit by brutal price competition and increasing risks for its lenders. Earlier the company was in talks to merge with Reliance Communications, but the merger talks have been called off. Now there may be a possibility that Aircel may have to shutter its business as a court order has also prevented it from selling its 2G and 3G spectrum. Aircel has also been trying to minimise the scale of its operations and intends to focus on Jammu and Kashmir, Tamil Nadu and the Northeast, three regions from where it earns the maximum revenue.Gross revenue of the telecom sector for the quarter ended March was moderated by around seven per cent growth on a year-on-year basis. It looks like tough days are ahead for the industry.