KUALA LUMPUR • It was supposed to be the crowning achievement of Malaysian tycoon Ananda Krishnan's five-decade career.
But his US$7 billion (S$9.3 billion) bet on mobile carrier Aircel may instead go down as one of the biggest 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.
Mr 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 telecommunications 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 service industries, the turmoil in telecoms is unlikely to help Prime Minister Narendra Modi's campaign to draw 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," said Mr Sampath Reddy, chief investment officer at Pune-based Bajaj Allianz Life Insurance.
"The Aircel episode definitely has lessons in the offing for anyone who starts a business in the country."
Mr Krishnan, 79, spent about US$800 million to purchase Aircel in 2006, when less than 10 per cent 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.
Faced with lacklustre growth at home, Mr 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, the holding company in which Mr Krishnan owns a 45 per cent stake, made about US$3.4 billion of shareholder advances to Aircel, one of the people with knowledge of the matter said.
Maxis Communications also bought US$1.2 billion of common stock and subscribed to US$1.6 billion of redeemable preference shares, the person said.
While he had deep pockets, Mr Krishnan failed to anticipate how cut-throat India's telecoms market would become. With nearly a dozen players jockeying for market share, call rates in India plunged to some of the lowest levels worldwide.
Competition has only intensified since 2016, when Reliance Jio Infocomm, owned by India's richest man Mukesh Ambani, stormed into the market and offered free calls.
Aircel made a last-ditch effort to gain scale by attempting a merger with Reliance Communications.
A setback came in January last year, 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".
After Aircel, Mr Krishnan is likely to spend more time focusing on his other businesses, which include Malaysian carrier Maxis and pay TV operator Astro Malaysia Holdings.