Tracing the journey of Aircel Sivasankaran: The maverick entrepreneur who went bankrupt

"When the current telecom boom was just a blip in many people’s minds, Siva had realized that the future was going to be big in this area," writes Sushila Ravindranath.
Tracing the journey of Aircel Sivasankaran: The maverick entrepreneur who went bankrupt
Tracing the journey of Aircel Sivasankaran: The maverick entrepreneur who went bankrupt
Written by:

By Sushila Ravindranath 

It is a forgotten fact that the telecom revolution actually started in Chennai with Sivasankaran and his Sterling Group. Sivasankaran’s story is full of high drama.

On August 26, 2014, the Supreme Court of Seychelles declared Chinnakannan Sivasankaran bankrupt. An official receiver will compile a list of Siva’s assets and sell them to pay back his creditors. Amongst Siva’s creditors, the largest is BMIC, a Bahrain Telecom or Batelco company. In a statement issued from Manama in Bahrain, Batelco CEO Alan Whelan said that the bankruptcy will not “…thwart our determination to recover the substantial monies that he owes us.”

In October 2013, WinWinD, his Finland-headquartered wind turbine venture, submitted a voluntary bankruptcy petition because it had “been incurring heavy losses for the past several years” and its debts had ballooned to around $300 million. “The efforts of WinWinD in trying to arrange for necessary funding and approval for restructuring process has not been successful and hence this decision,” the company said at that time.

At the turn of the century Siva had become a citizen of Seychelles. He purchased several properties in Seychelles and was reportedly developing resorts. Meanwhile he was also into the commodity business based out of Africa. He was even appointed Ambassador-at-Large for Seychelles. However, whatever he has recently touched has turned into straw. He seems to be on a downward spiral. People who know Siva think he is in a big mess. But they do not put it past him to survive this crisis.

Siva has always had a maverick streak. Quite unknown and completely unpretentious with no background in electronics, he burst into the Indian computer scene in the ‘80s. He understood the cost-conscious Indian market much before the much bigger names did. He changed the face of the Indian computer industry by offering the lowest priced PC and delivering it on the same day. His overheads were low. He literally thumbed his nose at established giants like HCL, Wipro, Hinditron, and DCL. He started assembling IBM compatibles for these larger manufacturers, and then launched his own label, Siva PC. He claimed it was named after Lord Siva and not himself.

Many saw him with wonder and suspicion. There were stories doing the rounds that he brought the computer hardware in plastic bags from cheap markets like Taiwan and South Korea and assembled them to sell them at what was then rock bottom prices (less than `30000) when the bigger names sold their assembled PCs for prices three or four times this. They called him a fly-bynight operator. They predicted he would make a packet and get out.

Get out he did, but only from the PC market. He realised that there were going to be many Siva PC clones. So he wanted to move on. He took his chances, was not bothered by failure as his mind was already working on the next big thing. He burnt his fingers trying to sell Osborne word processors which was one of his earliest ventures. He said in the mid-eighties, that the electronics industry is one place where reputations do not matter that much.

The level of obsolescence is very high and even an established manufacturer is not necessarily up-to-date. His heroes during this period were Steve Jobs and Bill Gates much before they became household names. Siva was absolutely confident that he was going to hit big time. He could see the potential in computers, electronics and telecom ahead of others. His networking skills are legendary.

There was a brief period when Siva flirted with joint ventures with the Tamil Nadu government. He wanted to get into nitro aromatics and titanium dioxide. He got the licences, but nothing came out of all this. He tried his hands at various things. He talked about a mega housing project. He bid for the Yellow Pages and got into legal trouble. But his heart was always in the hi-tech cutting edge businesses. He said in an interview during this period about his commitment to the hi-tech industry, “I like taking quick decisions, I enjoy learning new things, and the business is full of thrills. It is entirely suited to a creative entrepreneur like me.” This was in the early ‘90s. He was seen then as being close to the then DMK regime. When the AIADMK came to power, he literally disappeared from the scene, before surfacing again by successfully bidding for the Delhi Telecom circle.

When the current telecom boom was just a blip in many people’s minds, Siva had realized that the future was going to be big in this area. He was willing once again to take a huge risk and put in money in an unknown entity. In November 1994, Sterling Cellular entered into a license agreement with DoT. At that time Siva’s company had an equity base of which 49 per cent was to have been subscribed by the little known American company Cellular Communications International Limited (CCIL). All this was done according to the then prevailing rules. By May 1995 Siva had managed to get the Essar group to take over the Delhi circle. This was not as simple as it sounds. DOT did not allow license swapping then. The deal was put through with various twists and turns in which Swiss Telecom also played a part. Interestingly it was this deal which triggered major policy changes which eventually legitimised the buying and selling of licenses.

With the money he made (which exceeded `200 crore from the Ruias and several million dollars from Swiss Telecom) Siva turned NRI and started operating out of Singapore and California. There were tremendous lifestyle changes as well. Siva had become seriously rich. He had armed guards accompanying him everywhere. He had an entire floor of Singapore’s luxurious Ritz Carlton and in California he moved into rap musician MC Hammer’s vast estate.

The Essar group could not pay up the committed amount. They settled their account by handing over some fabulous real estate in Chennai.

The Ruias had got into a mess by buying up the majority shareholding in Tamilnadu Mercantile Bank (TMB), a bank promoted by the Nadar community. A faction of the community which held the major shareholding had sold its shares to the Ruias because of some family squabble. The rest of the community was up in arms. The RBI raised questions about the Ruias being allowed to buy the stake. Siva bought over the TMB shares from the Ruias and held on to them. For almost ten years the Nadars tried to buy the bank back from him. He said that he did not understand the fuss the Nadars were making. “After all, my best friend is a Nadar (Shiv Nadar), I went to a Nadar school, I buy provisions from a Nadar shop. I am an honorary Nadar,” he declared.

It is very difficult to keep track of Siva’s activities. Some are public and some very private. With no publicity whatsoever he promoted his venture Fresh and Honest Company to sell coffee and other hot beverages from vending machines brought from Switzerland. He put up a factory to make soya products. Incidentally he also turned a health freak during this period. People who came to discuss his telecom plans were served soya milk and soya products. A generous offer would be made to use his well-equipped gym. Another little known activity was AIWO, possibly India’s largest and most luxurious health spa which he set up for men in Chennai. There was also talk of his acquiring a stake in the ETN TV channel.

In his bidding for telecom circles, Siva had acquired the Tamil Nadu circle, barring Chennai. True to his style Siva brought down the cellular prices on par with basic rates and became the largest operator outside the metro. However, he had obviously made up his mind that he had to have the network operating in Chennai as well. Probably that motivated him to pick up a 9 per cent stake in Sunil Mittal’s Bharati Telecom Ltd a year after he sold off the Delhi circle. After registering 1.5 per cent of the shares, Bharati refused to register any more shares in the name of Siva. Accusations and counter accusations flew back and forth. Siva sounded surprised at the attitude of good friend Sunil. The issue got amicably resolved and Siva probably ended up making some more money in this transaction.

A couple of years later Siva launched Dishnet Ltd as a subsidiary of his Sterling group. It was the second private internet service provider to come up in the country. Dishnet brought DSL (digital subscriber line) technology to the country. It set up cybercafés, acquired corporate and domestic subscribers and also talked about submarine cables, went into narrow band and broad band and struggled like everybody else for the last mile connectivity. Although earlier announcements promised the usual Siva kind of Kmart pricing, it was not possible this time round. The telecom circles talked about Dishnet losing money. But Siva hung in there till he found the right buyer, who was Ratan Tata. For the Tatas this was a good fit after their VSNL take over. VSNL acquired the internet businesses of Dishnet. The broadband assets had the capacity to service more than 50000 customers in key cities in the country. Dishnet’s 20 dial up locations were not among VSNL’s existing 30 locations of operations. Thanks to this deal, Ratan Tata became a close friend and he became the advisor to Tata group for their telecom business. Siva acquired a 3.75 per cent stake in Tata Teleservices which he sold out later.

He also acquired the entire 65 per cent stake of Turner Morrison in the coffee pub chain Barista. Barista was jointly promoted by Turner Morrison and Tata Coffee. The Tata group continued to hold its 34 per cent stake in Barista. Since then Barista has changed hands several times and has been shut down.

Siva could not stay away from telecom. He bought the licence for Tamil Nadu and then acquired the one for Chennai from RPG Cellular. From here, he decided to expand his footprint. In March 2004, Siva applied for the licence in the eight circles of Madhya Pradesh, Assam, North East, West Bengal, Bihar, Orissa, Himachal Pradesh and Jammu and Kashmir. Letters of intent were issued on April 6. The company submitted compliance to the letters of intent on April 20 for seven circles, and sought additional time for Madhya Pradesh.

The next day, the company applied for licences for Uttar Pradesh (east) and Uttar Pradesh (west) as well. On May 7, licences were issued for all the circles, except Madhya Pradesh. Then, on May 26, Dayanidhi Maran took over as the Union Telecom Minister. Nothing was ever the same again. All clearances got stuck at the Department of Telecommunications. In June, Siva entered into an agreement with Hutchison to sell his Tamil Nadu operations for `1,200 crore—this would have given him the funds to roll out in the rest of the country. DoT delayed approvals. On March 3, 2005, Dayanidhi Maran sent the file back saying a report on mergers and acquisitions was awaited. The same month, Siva cancelled the deal.

In December 2005, Siva sold Aircel to Maxis of Malaysia, promoted by T Ananda Krishnan, a Malaysian of Sri Lankan origin. Eventually Siva accused the Maran brothers of forcing him to sell out to Maxis which resulted in CBI filing a charge sheet on the Marans saying that the Marans received `742 crore for coercing Siva to sell Aircel to Maxis to get investments in group companies Sun Direct (the DTH operator) and South Asia FM.

Siva then moved on. One of the companies to get controversy ridden licences under A Raja, the Telecom Minister, was STel. It had got six circles: Orissa, Bihar, Himachal Pradesh, Northeast, Assam and Jammu and Kashmir. Siva had acquired 51 per cent of it. Batelco bought 49 per cent in STel in 2009 for `1,000 crore. By then, opposition to the allotment of inexpensive spectrum had gathered momentum. Raja was removed. Several people, including Raja, were taken into custody. Finally, in February 2012, the Supreme Court cancelled all the 122 licences allotted by Raja. STel, which had about 3.6 million subscribers in five circles, had no option but to shut shop. That is when BMIC, which owned 42.7 per cent in the company, invoked the “put” option under which in an exigency like this Siva had to buy out its stake at the price at which it had been bought: $212 million. BMIC says Siva never paid up.

There has always been an element of mystery about Siva’s life and deals. His deals have always been complex to unravel. People close to Siva say he will be able to meet his current challenges.

Excerpted with permission from ‘Surge: Tamil Nadu’s Growth Story’ by Sushila Ravindranath, Westland, August 2016.

You can buy the book here

Related Stories

No stories found.
The News Minute