Aircel may recast Rs 20k-cr debt if Rcom deal doesn’t get nod

Aircel is considering an independent restructuring of its Rs 20,000-cr debt as one of the options for continuing operations on its own in case the pro-posed merger with Reliance Communications does not get approval, people familiar with the matter said.

The carrier, whose majority is owned by Malaysia’s Maxis, has approached financial consultants to explore such are structuring and has sought advice on whether it could use insolvency or debt recast to cut debt and continue as a niche player in a limited number of circles, one of the people said.

At a recent closed-door meeting, Aircel chief executive Kaizad Heerjee advised his finance, human resources and technology heads to plan running the company as if no merger with Reliance Communications was planned, one person close to the matter said.

RCom and Aircel didn’t respond to ET’s detailed queries sent on July 31, but officials close to the companies privately said both are committed to the deal. Aircel’s moves come as the two telcos are running against time to get the merger cleared by authorities, including in the National Company Law Tribunal (NCLT).

The NCLT will next hear on Au-gust 14 whether to admit the merger petition for consideration amid opposition from lenders including China Development Bank, vendors such as Ericsson and Bharti Infratel, besides the telecom department (DoT).

Amid all this, both RCom and Aircel are continuously losing subscribers and re-venue, amid widening losses and rising debt. RCom is banking on the Aircel deal and sale of its tower unit to Brookfield —contingent on the Aircel deal since the buyer wants clarity on tenancy guarantees — to pare its over Rs 45,000 crore debt by 60%.

But they must do so by December under a strategic debt restructuring (SDR) process — triggered after RCom defaulted on some loan payments — else it will fall into an NPA (non-performing assets) category which will force lenders to take over, scuttling any deal.

In December last year, the two companies announced a 50:50 JV — to be named Aircom — in what would have been the first merger of scale in the sector. RCom has lost 4.2 million users between December, when the merger with Aircel was announced, and May.

Aircel has lost 142,021 users in the same period. Both have struggled to take on the brutal price competition triggered by the entry of Reliance Jio last September. “We are selling at the lowest prices ever, but that is still higher than free,” said a sales executive at Aircel. “At this rate, how will the combine service debt,” another asked.