After speculations that mobile network operator Aircel may have to shut down its business after merger talks with Reliance Communications were called off, it looks like troubled times for the carrier have just begun. Aircel has now reportedly defaulted on its debt repayment due to its weak financial position.

Aircel has been failing to meet its loan repayment deadlines, due to which its account has been tagged as SMA1 (payment overdue between 31-60 days) by the State Bank of India and other lenders. And on Thursday, November 16, rating agency CARE downgraded Aircel's rating to D.

"The company has delayed in repayment of interest on its debt obligations on account of its weak liquidity position as a result of its continuing weak operational performance in the hyper competitive telecom sector," the Economic Times quoted CARE as saying.

The agency also said that its next rating will depend on if Aircel is able to pay its future instalments on time, "finalisation of its new business plan after discussions with the lenders and any change in regulations affecting the business and the telecom industry."

Earlier, Aircel was in talks to merge with Reliance Communications, a brand that is also witnessing quite some issues including debt. RCom too had defaulted on its loan repayment obligations with more than 10 banks. While the merger talks have been called off, there may be a possibility that Aircel may have to shutter its business as a court order has also prevented it from selling its 2G and 3G spectrum. Aircel does not own a 4G spectrum.

The firm is already under a lot of debt and many analysts have pegged the amount at about Rs 20,000 crore. To save itself, Aircel will have to come up with a new deal to pitch it to other buyers but will have to exclude the sale of spectrum.

The new deal could include its wireless assets and the 40,000 mobile towers that it owns. Aircel is said to have about 89 million subscribers.

The deal to sell the business to another player is important to Aircel as it doesn't have the option of shutting down claiming bankruptcy, as that would bring up the bank guarantees of Malaysian parent firm Maxis and Aircel could end up in court.

Aircel has also been trying to minimise the scale of its operations and intends to focus on Jammu and Kashmir, Tamil Nadu and the Northeast, three regions from where it earns the maximum revenue.