Aircel Downgrades to Default on Delayed Debt Repayments
Credit rating of major Indian mobile network operator Aircel got downgraded on Friday, after it missed servicing at least one of its debt obligations.
Ratings agency CARE said that the company has delayed its repayment of interest to its consortium of lenders due to its weak liquidity position on account of its continuing poor operational performance.
As a result, the agency decided to demote Aircel’s unlisted long-term bank facilities, which was at ?174.79 ($2.69 billion).
Aircel, which is owned by Malaysian communications provider Maxis Communications, is now back on a CARE D rating, which means default or a potential default.
An analyst for CARE also said that the holdup is currently less than 30 days and the capital is not expected to be repaid until next year.
India’s Price War Impacts Aircel
The overall amount of debt at Aircel has not been identified so far and the mobile carrier did not immediately commented on the matter.
Aircel is the second major telecom company to default on its loans. Rival telecom group Reliance Communications Ltd. defaulted on a number of bond repayments just days earlier of Aircel.
India’s telecom industry has been going through a price war ever since 4G network provider Relian Jio Infocomm Ltd. joined the sector.
Since its release in September, Jio has drawn nearly 140 million subscribers through its low-priced offerings, pushing its competitors to come up with their own offers that only resulted to lower revenues and profits.
As they look for ways to deal with the emerging price war, several reputable companies have considered collaborating with their rivals, including Aircel and Reliance Communications.
The two companies had until recently planned to merge their wireless operations, so as to transform it into a new entity, which was supposed to help move a portion of the debt. The deal however, collapsed in the previous month.
Following the cancellation of the merger, Aircel and Reliance Communications had to return to lenders with separate business plans, but neither has been able to maintain servicing its debts.
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