Let it be of any business you think; it’s all about the efforts of the workforce and the smart decisions by the executives, which paves the way to success. However, the most important aspect is that when any business reaches at its peak, there may be a downward trend in its business operations, it is important to keep an eye on the market trends and find a suitable strategy to mitigate the risk. What do you think of this? Yes! the companies have to look into and take the appropriate decisions to sustain.
According to my opinion, the existing giants are capable of identifying the threat in advance and know well how to deal with it. But what exactly happened in the case of Aircel? Have they done well in the beginning? The journey started way back in 1999, and everything was going exceptionally good until March 2018, the telecom operator filed for insolvency.
Aircel struggled to continue operating as a business after Jio entered the telecom sector since they suffered enormous losses of almost $150 billion. In the same year, they generated a profit of 120 Crores, but with the losses, they chose to discontinue the whole business and signed off. Most likely, they would have attempted every method to resume their activities but remained quite unfortunate. Also, survival is a key component of every organization; because which they weren't able to, so they took a step back.
Aircel served their customers for a long period of time before falling, but what were their reasons for failure? Was there any last hope to rise again? Let us get into it:
Sudden Decrease in the Market share
Indeed Aircel was one of the top ten and the fifth-largest operator, and it also had a share of 8.5% of the market. However, shares plummeted when Jio entered the space with a market penetration strategy. The situations were unfavorable for Aircel and prompted it to lower the price to maintain its shares, but they backfired. Even then, to stay alive with the customers and the market, they reduced the price further, which led to negative operating cash flows and losses. Eventually, they were completely out of the game.
As far as my intellect goes, no company is sheltered in this competitive world; even if they showcase a supreme touch with the customers, any future value proposition can bounce them back. Do you agree? I believe you agree to my thought. It’s better for firms to be vigilant in their target market and ponder about smooth movement to overcome risk.
Additionally, as the funds were insufficient and due to the negative cash flows for operating business tasks, they were not even able to pay the tower companies or the interconnect fee to other service providers.
The Merger with Reliance, that never was
Aircel anticipated that they may get adequate funding from Reliance and be the lender of last resort, but nothing has worked in their way of thinking, and Reliance went back.
Why did they decide not to assist in their tough times? Can you recall the Aircel-Maxis scam back then? The reason why Reliance didn’t favor Aircel, and since it was a sensational case, they may have dropped their business plans.
In case if the merger could have happened, Aircel had a great chance to recover from the outstanding debt of 14000 Crores. Moreover, handling the telecom operations is a bit challenging as it requires huge funds to cover the risks.
Debt Restructuring Program
As the business activities were not up to the mark, Aircel came up with a plan to issue shares on account of the Strategic Debt Restructuring Programme so that they could deal with the existing losses. May be they would have thought this plan works well and can be able to bring back their strong position in the market.
However, everything was quite unfortunate that the RBI has introduced few rules for the Strategic Debt Restructuring Programme by making it stringent and passed an order that the current SDR should be cleared within six months; otherwise, it will be transferred to the National Company Law Tribunal. May be it could have been the great unexpected rule for Aircel that caused the stoppage of the SDR programme.
Though Aircel became unsuccessful, they put forth all their efforts to serve the customers back again, but finally they had to surrender themselves as all the doors remain unopened.
To sum up, the initial journey never foresees that there would a major risk of collapse. Winning and losing is a part of the game. I would wish that Aircel should come back with competent strategies and sustain just like the other operators. Let us see for their arrival.