JIO, AIRTEL AMONG BIDDERS FOR AIRCEL FIBRE BUSINESS
Leading Indian telcom companies Reliance Jio and Bharti Airtel, private equity fund AION Capital Partners, a joint venture between Apollo Global Management and ICICI Venture, and I Squared Capital, an independent global infrastructure investment firm, have bid for Aircel's fibre assets.
While an email to I Squared did not elicit any reply, the spokespersons of the other three companies declined to comment on the issue.
After Aircel came under the National Company Law Tribunal (NCLT), its resolution professional invoked Regulation 29 of the Insolvency and Bankruptcy Board of India. Under the rules, a resolution professional can sell unencumbered assets of the corporate debtor, other than the ordinary course of business if he is of the opinion that such a sale will lead to better realisation of value. However, there is a rider: The book value of all assets sold during the resolution process should not exceed 10 per cent of the “claims admitted by the interim resolution professional”. A bona fide purchaser under this regulation will get a free and marketable title to the assets.
Aircel’s fibre business is considered to be its most attractive asset. According to bidders, Aircel has an underground fibre cable business of more than 15,000 km, and has a sizeable presence in Jammu & Kashmir and the Northeast, where laying fibre is tough and time-consuming because of the terrain. The company also has an enterprise business, but it is not clear as to whether there have been any takers for that.
Aircel has a debt of nearly ~200 billion and the telco’s attempts to restructure its loans did not go though, forcing it to go to the NCLT in February.
The company had made an attempt to merge with Reliance Communications, but called off the deal in 2017 citing legal uncertainties. This would have substantially reduced its debt. Malaysian tycoon Anand Krishnan had invested over $7 billion through his company Maxis but later decided not to pump in more money.
The fibre assets could fetch an attractive price because the telcos are investing large sums to backhaul their towers with fibre instead of microwave communication. With only 25 per cent of the over 561,000 towers fibre-connected, there is a huge need to for laying fibre.
Also, with right of way costs (the money paid to municipalities to get permission to lay the fibre underground) hitting the roof and with municipalities chary of giving permission, it is more attractive to buy than build it from scratch. The need for fibre will get even higher as both Airtel and Jio are now moving to launch fibre-to-home in various cities of the country.
Bharti has over 250,000 kms of fibre across the country, while Jio has over 300,000 kms of fibre capacity and has also bought the fibre assets of Reliance Communications, which will add another 170,000 kms to its total. Bharti has also transferred its optic fibre cable business to a 100 per cent subsidiary Telesonic Networks.