Malaysian tycoon's $7 billion wipeout turns his India dream into nightmare

[tennisluvr]

It was supposed to be the crowning achievement of Malaysian tycoon T Ananda Krishnan's five-decade career.

But his $7 billion bet on mobile carrier Aircel + Ltd may instead go down as one of the biggest-ever flops by a foreign investor in India, a stark reminder that doing business in the world's fastest-growing major economy is often a lot tougher than it looks.

Krishnan's holding company stands to lose all the money it poured into Aircel over the past 12 years, people with knowledge of the matter said, after the carrier filed to start bankruptcy proceedings this week. Buffeted by intense competition and regulatory uncertainty, Aircel is the latest in a long list of casualties in an Indian telecom market that only a few years ago was luring foreign entrants in droves.

While international companies have fared much better in India's buoyant consumer products and financial services industries, the turmoil in telecom is unlikely to help Prime Minister Narendra Modi's campaign to lure more foreign capital. In January, his government eased restrictions on foreign direct investment in several sectors, including single brand retail, real estate brokerages and power exchanges.

"India has always been a difficult market, even as it offers the prospects of great demographics and a billion-plus population," Sampath Reddy, chief investment officer at Pune-based Bajaj Allianz Life Insurance Co, said by phone. "The Aircel episode definitely has lessons in the offing for anyone who starts a business in the country."

Krishnan, 79, spent about $800 million to purchase Aircel in 2006, when less than 10 percent of India's 1.1 billion people owned a mobile phone and the scope for growth looked nearly limitless.

By that time, the Harvard Business School graduate had already established himself as one of Malaysia's most powerful billionaires, with controlling stakes in the country's biggest mobile-phone and pay-television operators and close ties to former Prime Minister Mahathir Mohamad.

India Allure

Faced with lackluster growth at home, Krishnan saw India's booming market as key to his empire's future. And he was willing to invest big to make Aircel a success.

Over the years, Maxis Communications Bhd, the holding company in which Krishnan owns a 45 percent stake, made about $3.4 billion of shareholder advances to Aircel, one of the people with knowledge of the matter said. Maxis Communications also bought $1.2 billion of common stock and subscribed to $1.6 billion of redeemable preference shares, the person said.

While he had deep pockets, Krishnan failed to anticipate how cutthroat India's telecom market would become. With nearly a dozen players jockeying for market share, call rates in the country plunged to some of the lowest levels worldwide. Competition has only intensified since 2016, when Reliance Jio Infocomm Ltd., owned by India's richest man, stormed into the market and offered free calls.

Aircel made a last-ditch effort to gain scale by attempting a merger with Reliance Communications Ltd. A setback came in January 2017, when India's highest court barred Aircel from selling or leasing its airwaves amid a broader graft lawsuit. The deal eventually collapsed in October last year.

The company summed up its dire situation in a Twitter post on Wednesday announcing the bankruptcy filing, saying Aircel had been "facing troubled times in a highly financially stressed industry, owing to intense competition following the disruptive entry of a new player, legal and regulatory challenges, high level of unsustainable debt and increased losses."

A representative for Maxis Communications declined to comment

After Aircel, Krishnan is likely to spend more time focusing on his other businesses, which include Malaysian carrier Maxis Bhd. and pay-TV operator Astro Malaysia Holdings Bhd, the person with knowledge of the matter said. Both companies are still profitable, though their stock prices have dropped by an average 10 percent over the past year, versus a 9.6 percent gain in Malaysia's benchmark equity index, according to data compiled by Bloomberg.

That doesn't mean Krishnan is giving up on India entirely. He still controls a stake in South Asia FM Ltd, a radio broadcaster, and TV service provider Sun Direct. The businesses are performing well, and Krishnan currently has no plans to sell, the person said.

[tennisluvr]

Eventually Reliance will be the only telecom provider, and it will be a monopoly again like the good old days. 

[Idassamed]

3 minutes ago, tennisluvr said:

Eventually Reliance will be the only telecom provider, and it will be a monopoly again like the good old days. 

 

[Idassamed]

Someone needs to show Reliance it's place.

[Idassamed]

Manchi competition ravali

[Balibabu]

Reliance gadiki India antey vadi own asset...natural resources vadivey and a government ayina sarey vadiki land kavali antey teseskuntadu govt value ke jobs create chesta ani but vadey full ga benefit avutadu at the end....konni days ayyaka mana lands lageskoni govt hand tho and vatiney manaki lease ke istadu even House kuda... Tata la ethics leni idiot 

[dasara_bullodu]

He invested in 5G he is reaping the benifits ...picha lite ..ikkada ATnT ki unna historical monopoly evadiki ledu

[alpachinao]

2 hours ago, Idassamed said:

Manchi competition ravali

Data is new oil for ambani but will see how good he run for long... Off course same applies for all

[Android_Halwa]

Thanks to Congress, Chidambaram and DMK family ....Aircel duknam bandh aipoindi

[Don_Draper]

5 hours ago, tennisluvr said:

Eventually Reliance will be the only telecom provider, and it will be a monopoly again like the good old days. 

Tokki odlipedtadu mukesh ambani.. Att kuda try chestondi but reliance ranivaddu.

[Don_Draper]

3 hours ago, alpachinao said:

Data is new oil for ambani but will see how good he run for long... Off course same applies for all

He will eventually shift to different vertical

[kittaya]

6 hours ago, tennisluvr said:

Eventually Reliance will be the only telecom provider, and it will be a monopoly again like the good old days. 

income tax kattalsina lossess anni dinitho cover chesthu happy ga bussiness chesthunadu....  amabani is an empire controlling India indirectly

[alpachinao]

1 hour ago, Android_Halwa said:

Thanks to Congress, Chidambaram and DMK family ....Aircel duknam bandh aipoindi

karthi gadi hand vunda

[princeofheaven]

11 hours ago, tennisluvr said:

It was supposed to be the crowning achievement of Malaysian tycoon T Ananda Krishnan's five-decade career.

But his $7 billion bet on mobile carrier Aircel + Ltd may instead go down as one of the biggest-ever flops by a foreign investor in India, a stark reminder that doing business in the world's fastest-growing major economy is often a lot tougher than it looks.

Krishnan's holding company stands to lose all the money it poured into Aircel over the past 12 years, people with knowledge of the matter said, after the carrier filed to start bankruptcy proceedings this week. Buffeted by intense competition and regulatory uncertainty, Aircel is the latest in a long list of casualties in an Indian telecom market that only a few years ago was luring foreign entrants in droves.

While international companies have fared much better in India's buoyant consumer products and financial services industries, the turmoil in telecom is unlikely to help Prime Minister Narendra Modi's campaign to lure more foreign capital. In January, his government eased restrictions on foreign direct investment in several sectors, including single brand retail, real estate brokerages and power exchanges.

"India has always been a difficult market, even as it offers the prospects of great demographics and a billion-plus population," Sampath Reddy, chief investment officer at Pune-based Bajaj Allianz Life Insurance Co, said by phone. "The Aircel episode definitely has lessons in the offing for anyone who starts a business in the country."

Krishnan, 79, spent about $800 million to purchase Aircel in 2006, when less than 10 percent of India's 1.1 billion people owned a mobile phone and the scope for growth looked nearly limitless.

By that time, the Harvard Business School graduate had already established himself as one of Malaysia's most powerful billionaires, with controlling stakes in the country's biggest mobile-phone and pay-television operators and close ties to former Prime Minister Mahathir Mohamad.

India Allure

Faced with lackluster growth at home, Krishnan saw India's booming market as key to his empire's future. And he was willing to invest big to make Aircel a success.

Over the years, Maxis Communications Bhd, the holding company in which Krishnan owns a 45 percent stake, made about $3.4 billion of shareholder advances to Aircel, one of the people with knowledge of the matter said. Maxis Communications also bought $1.2 billion of common stock and subscribed to $1.6 billion of redeemable preference shares, the person said.

While he had deep pockets, Krishnan failed to anticipate how cutthroat India's telecom market would become. With nearly a dozen players jockeying for market share, call rates in the country plunged to some of the lowest levels worldwide. Competition has only intensified since 2016, when Reliance Jio Infocomm Ltd., owned by India's richest man, stormed into the market and offered free calls.

Aircel made a last-ditch effort to gain scale by attempting a merger with Reliance Communications Ltd. A setback came in January 2017, when India's highest court barred Aircel from selling or leasing its airwaves amid a broader graft lawsuit. The deal eventually collapsed in October last year.

The company summed up its dire situation in a Twitter post on Wednesday announcing the bankruptcy filing, saying Aircel had been "facing troubled times in a highly financially stressed industry, owing to intense competition following the disruptive entry of a new player, legal and regulatory challenges, high level of unsustainable debt and increased losses."

A representative for Maxis Communications declined to comment

After Aircel, Krishnan is likely to spend more time focusing on his other businesses, which include Malaysian carrier Maxis Bhd. and pay-TV operator Astro Malaysia Holdings Bhd, the person with knowledge of the matter said. Both companies are still profitable, though their stock prices have dropped by an average 10 percent over the past year, versus a 9.6 percent gain in Malaysia's benchmark equity index, according to data compiled by Bloomberg.

That doesn't mean Krishnan is giving up on India entirely. He still controls a stake in South Asia FM Ltd, a radio broadcaster, and TV service provider Sun Direct. The businesses are performing well, and Krishnan currently has no plans to sell, the person said.

all the big businessmen in India are crony capitalists

https://www.indiatoday.in/magazine/interview/story/19960131-i-will-return-to-india-and-face-trial-but-after-teaching-dawood-a-lesson-says-chhota-rajan-833413-1996-01-31

see how dawood controls big business in india

[Balibabu]

2 minutes ago, princeofheaven said:

all the big businessmen in India are crony capitalists

https://www.indiatoday.in/magazine/interview/story/19960131-i-will-return-to-india-and-face-trial-but-after-teaching-dawood-a-lesson-says-chhota-rajan-833413-1996-01-31

see how dawood controls big business in india

Article 1996 de ippudu status entidi