)
Malaysian telecom major Maxis Berhad, which owns a 74 per cent equity stake in wireless telephone operator, Aircel, has pumped in a little more than Rs 6,000 crore as 'quasi equity' into the Indian firm to finance the latter's annual interest outgo of Rs 2,500 crore, besides other things. The funds were infused by the promoter after banks asked Aircel to bring more money into the company before a four-year moratorium on payment of the loan's principal amount could be given. Following fund infusion by the promoter, Aircel, which was to begin paying part of the principal amount from next year, has got a major reprieve.
The infusion of more funds by the Malaysian telco had been necessitated as Aircel, the seventh-largest wireless player in India, had drawn the entire limit of its sanctioned debt, of around Rs 20,000 crore, from a State Bank of India-led consortium of bankers and foreign loans, to finance its losses.
Now, after a major restructuring exercise, Aircel, which had incurred a steep Rs 11,476-crore loss in the 2012 calendar year - one of the biggest by a telco in a year - not only increased its income substantially but also substantially cut down on its losses in the first six months of this year.
Aircel's losses in the six months ended June 31 were Rs 342 crore, even as its income rose to Rs 6,809 crore (compared with a total income of Rs 8,302 crore in full 2012 calendar year). For the first half of 2012, it had posted a loss of Rs 724 crore in its Rs 3,898-crore income. And, its losses had increased substantially in the second half of that year.
Sources close to the company say Maxis does not yet have any plan to convert its quasi equity and increase its stake beyond the current 74 per cent. Suneeta Reddy and others (part of the Reddy family that controls Apollo Hospitals) own the remaining equity and are not planning to pump in any money into the company, a banker says. With Apollo not investing, bankers say Maxis could increase its stake as the government laws now allow up to 100 per cent foreign equity. An Aircel spokesperson declined to comment on the issue.
Sources involved in the financial recast say the focus at Aircel currently is achieving a break-even and then making enough profits to make payments of interest, as well as the principal, on its own. Until then, Maxis is ready to put in more money to finance the interest burden through putting more 'quasi equity' into the company.
It's only after Aircel has repaid all its debt and created sufficient value in the company that it might look at repaying the 'quasi equity' received from the Malaysian promoter. Also, the company has been under a cloud, with the Central Bureau of Investigation (CBI) probing its promoters' role in the 2G spectrum scam. Aircel's former promoter C Sivasankaran had alleged former telecom minister Dayanidhi Maran forced him to sell his company to Maxis.
The Rs 20,000-crore debt on Aircel's books comprises Rs 18,000 crore lent by banks - Rs 14,000 crore of domestic debt and Rs 4,000 crore of foreign. Another Rs 2,000 crore is unfunded debt, based on guarantees by banks. The company's total debt had shot up primarily due to its hefty payout of Rs 13,500 crore for buying 3G and broadband wireless access (BWA) spectrum.
The infusion of cash by Maxis has helped it avoid going for a debt restructuring. In September this year, Aircel achieved an operating break-even for the first time, said company officials. In a recent interview, Aircel COO Kaizad Heerjee had said his company had made operating profits in seven circles and its target was to do so in 10 circles by the end of this year. It also hoped to make operating profits in 2014-15.
On the operations front, the company has been slowly gaining subscriber market share - 7.06 per cent at present - closing in on Tata Tele, which has a share of 7.32 per cent, according to Trai figures for up to July 31. In July, Aircel's net incremental increase in subscriber base stood at 750,000, the most by a telco in that month.
However, its performance on the basis of active subscribers - over 63 per cent - is far lower than the industry average of 83.60 per cent. It has also been able to push its average revenue per user from Rs 133 to about Rs 145 for pre-paid services in the past few quarters. But its realisation per minute is still at a low 32 paise, unlike the market leaders, which have been increasing this through higher rates. Aircel's data push has also helped; its data revenues, excluding SMS, constitute 12 per cent of its total revenues. Heerjee had pointed out that the company would require a revenue market share of 7-9 per cent in each circle to break even.
