Aircel Limited remains a key telecom operator in the industry, with a 3G spectrum holding in 13 circles and 4G in eight circles. The company made headlines last year with the launch of 4G services in the country, ahead of other broadband wireless access  spectrum holders such as Reliance Jio Infocomm Limited and Tikona Digital Networks. Meanwhile, in order to expand its 3G presence, the company signed intra-circle roaming (ICR) agreements with other operators and launched its services in remote areas of Arunachal Pradesh and other north-eastern states. It also entered into partnerships with key smartphone vendors such as Micromax to encourage the uptake of both its 3G and 4G services. These developments have kept the company in focus over the past year.

Aircel forayed into the Indian market in 1999 and focused mainly on Tamil Nadu and other southern circles during the initial years of its operations. In 2005, Malaysia-based Maxis Communications acquired 74 per cent stake in the company, after which Aircel witnessed significant growth. In less than four years of the acquisition, Aircel gained a substantial market share while its markets in the southern and north-eastern circles continued to be the key drivers for its business growth. However, in recent years, the company has suffered a downturn owing to its alleged involvement in the 2G scam and delayed returns from its 3G services launched in 2011. The company is now moving towards recovery with its recent efforts being aimed at improving its credibility and market position.

Key developments and growth strategy

The launch of 4G services in six of the eight circles for which it holds licences in the 2300 MHz band was a key milestone for the company in 2014. Aircel launched 4G long term evolution (LTE) services in the Andhra Pradesh, Tamil Nadu, West Bengal, Bihar, Odisha, Assam, the northeast, and Jammu & Kashmir circles. With this launch, the company became the second operator after Bharti Airtel to introduce these services in the country. The launch was part of its strategy to tap the data surge in the market.

As part of its 4G expansion in India, Aircel is providing high speed internet and secure VPN services to its enterprise customers. The parameters differentiating the company’s 4G LTE services include customised offerings for both enterprise and residential customers. Further, it plans to build a reliable MPLS core network, which can offers high speeds and has low latency, critical to any enterprise service experience.

In addition, Aircel has launched its 3G services in Mumbai, through a 3G-ICR agreement with Reliance Communications (RCOM). While the operator holds licences for 3G spectrum in 13 circles, this does not include the Mumbai circle. Being a metro circle, Mumbai demands next-generation technologies and affordable plans to meet its data requirements. Aircel has been focusing on such markets to drive up revenues. Further, the company has been providing its 3G services through 3G ICR agreements in the Delhi and Rajasthan circles. To improve network management, it has recently awarded a network optimisation contract to Astellia, a network intelligence provider. This can help the company further improve its service provision in the circles where it offers 3G services.

Apart from these, the company has been leveraging opportunities provided by Wi-Fi technologies. It currently has a network of over 50,000 Wi-Fi hotspots, which will help the company ease network congestion once 3G and 4G services gain traction. The operator has also adopted aggressive marketing strategies and introduced innovative bundled offerings to improve its market position.

Operational performance

On the operational front, Aircel has continued to witness strong growth in its data subscriber base and revenue due to the launch of 3G/4G services and affordable data offerings in partnership with handset manufacturers. The company’s total subscriber base has grown 19.92 per cent, from 63.25 million subscribers in the quarter ended September 2013 to 75.85 million subscribers in the corresponding quarter in 2014. The company also has a sizeable rural subscriber base of 26.81 million, which comprises 35.3 per cent of its total subscriber base, as of the quarter ended September 2014. This is on account of the company’s strong presence in circles such as Jammu & Kashmir, Assam, Bihar and the Northeast, which have a large rural population. Meanwhile, the company also has a sizeable presence as an internet service provider, holding a market share of 6.5 per cent in a largely fragmented market.

As per Telecom Regulatory Authority of India (TRAI) estimates, Aircel has shown a consistent rise in its gross revenues, which include revenues from all licensed operations. The company’s gross revenues have grown at 13.65 per cent from Rs 28.2 billion in the quarter ended September 2013 to Rs 32.05 billion in the quarter ended September 2014.

Despite the steady growth in revenues, the company’s finances continue to be impacted by heavy debt. According to the Department of Telecommunications, Aircel had a negative net worth of Rs 41.98 billion at the beginning of 2014. It is also had a debt of over Rs 200 billion. As a result of its weak financial health, the company is looked upon as a potential acquisition target by large players.

Challenges and the way ahead

Aircel faces both operational as well as financial challenges. On the operational front, it is amongst the three key telecom operators that have poor service quality due to excessive congestion at the points of interconnection, according to TRAI. It is also reportedly amongst the top three net losers of subscribers through mobile number portability. The company is already taking initiatives in this regard by awarding a network management contract to Astellia. It is also attempting to roll out Wi-Fi services through 4G LTE, which can help reduce network congestion.

In an attempt to refinance its debt, Aircel is likely to secure about $1.1 billion from six international banks including the China Development Bank and Nordic Investment Bank. It is also planning to raise Rs 140 billion from 12 Indian banks, including the State Bank of India, Canara Bank, L&T Infrastructure Finance Company Limited, Syndicate Bank and Bank of Baroda. The company’s efforts will be crucial in facilitating a reduction in its debt burden. However, it remains to be seen whether Aircel, despite its financial condition, will be able to compete with other telecom operators in the upcoming spectrum auction.

Going forward, the company will be able to maintain its market position in the telecom industry only if it captures the growing data demand. While the company has put all its efforts into this, successful adoption of these services will only come about with improved quality of service and attractive data offerings. Further, it needs to improve its presence in Tier I cities (Categories A and B), which have higher smartphone penetration, that can, in turn, drive revenue growth. These efforts, combined with its growing rural subscriber base can help Aircel sustain itself in an industry that is moving towards consolidation.