Aircel joins RCom on the naughty step

Reliance Communications has been suffering recently, but perhaps there will some comfort in the knowledge Aircel has been missing its debt repayments as well.

According to Care Ratings, the company missed a debt repayment and has therefore been downgraded. Few will be surprised by the news Aircel is struggling to compete, but the risk of the Indian telecom market getting smaller is becoming quite real.

“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,” Care Ratings said in a statement.

Aircel has been under pressure in recent months, primarily due to the entrance of Jio and the race to the bottom which has been caused by the disruptive pricing model. Funnily enough, since the introduction of Jio, Aircel has actually increased the number of subscribers it commands, though its share of the market has gone down.

According to Ovum’s WCIS, Aircel currently has 90.6 million subscribers, compared to 85.6 million in December 2015. Over the course of the same period, its market share has decreased from 8.49% to 7.51%.

This trend is not uncommon. The majority of the Indian telcos have been increasing their subscription numbers over the last couple of months, the challenge is they aren’t able to make any money off them. What is quite clear, is that no-one is set up for the Jio pricing model, but Aircel is a worse position than most.

Believe it or not Aircel and Reliance were actually planning to consolidate their debts into one easy to manage monthly payment earlier this year. That plan went horribly wrong, as has everything else for the two companies subsequently. In hindsight it’s hard to imagine a scenario in which that merger could possibly have not ended in tears.