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UPDATE 1-Indian mobile carrier Aircel delays debt servicing, says ratings agency
November 17, 2017 / 10:28 AM / a month ago

UPDATE 1-Indian mobile carrier Aircel delays debt servicing, says ratings agency

(Adds details from ratings agency, context, background)

By Sankalp Phartiyal and Devidutta Tripathy

MUMBAI, Nov 17 (Reuters) - Indian mobile carrier Aircel Ltd has delayed servicing its debt obligations, a ratings agency said, adding to the woes of the country’s telecoms sector that has been rattled by a price war and high debt levels.

CARE Ratings downgraded unlisted Aircel’s long-term bank facilities, which it said was at 174.79 billion rupees ($2.7 billion). The ‘CARE D’ rating indicates a default or a potential default, according to the agency.

It was not immediately known how much the total debt was at Aircel, the sixth-ranked Indian mobile carrier by subscribers and 74 percent owned by Malaysia’s Maxis Communications Bhd .

“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,” the ratings agency said in a Nov. 16 note.

Aircel, its parent Maxis and one of its main lenders State Bank of India did not immediately respond to requests seeking comment.

Aircel becomes the latest telecoms carrier to stumble on debt-servicing obligation. Rival Reliance Communications earlier this year won a temporary reprieve from creditor banks as part of a restructuring plan after delaying loan repayments.

Aircel and Reliance Communications had planned to combine their wireless operations under a new company, which would have moved part of the debt to the new company’s books. That deal fell apart last month.

India’s telecoms sector, the world’s second-biggest by number of users, has been hit by a price war after Reliance Jio Infocomm’s entry late last year. Jio, with its cut-price offerings, has forced rivals to match its prices, sending most of them to losses.

In the wake of increasing stress in the sector, India’s central bank earlier this year asked commercial banks to review their loan exposure to telecoms companies and make additional provisions for the loans.

India’s banking sector has $146 billion of stressed loans, led by sectors such as metals and power. Bankers have played down risks from telecoms sector saying the sector’s share in their loan books was relatively smaller.

Aircel, with 89 million customers as of end-August, has a nationwide presence. The company had an interest coverage ratio of 0.52 based on its 2016 financials, CARE Ratings said, adding the company posted a loss of 43.19 billion rupees for that year.

Indian banks typically categorise borrowers who delay servicing their loans for up to 60 days as “special mention accounts”. Loans not serviced for 90 days or more become non-performing unless a restructuring is agreed. ($1 = 64.9300 Indian rupees) (Reporting by Sankalp Phartiyal and Devidutta Tripathy; Additional reporting by Liz Lee in Kuala Lumpur; Editing by Gopakumar Warrier)

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