Singapore Telecommunications Ltd (Singtel) will indirectly raise its stake in Bharti Airtel Ltd by investing Rs2,649 crore in Bharti Telecom Ltd, the promoter company of Airtel, through a preferential allotment of shares.
The investment comes within two years of Singtel’s participation in Bharti Telecom’s rights issue of Rs2,500 crore, which was completed in February 2016, Bharti Airtel said in a statement on Monday.
With the latest round of investment, Singtel’s total stake (along with its affiliates) in Bharti Telecom will increase to 48.9% from 47.17% currently, the statement said. The Mittal family owned Bharti Enterprises continues to hold over 50% stake in Bharti Telecom.
The transaction is subject to approval by shareholders of Bharti Telecom and the funds raised will be used towards debt reduction, the company said.
“The transaction is sentimentally positive for Airtel. It is a sign of confidence by Singtel in Airtel,” a Mumbai-based analyst said on the condition of anonymity.
Companies in the debt-laden telecom sector have been witnessing a double whammy after the entry of Reliance Jio Infocomm Ltd which brought tariffs to rock-bottom and hit the revenue streams of other operators.
Bharti Airtel’s quarterly profit for the December quarter plunged 39% to Rs306 crore, as India’s telecom regulator more than halved interconnection fees and a pricing war triggered by the entry of Reliance Jio Infocomm continued unabated.
Airtel’s net debt as of 31 December was Rs91,713.9 crore, up from Rs91,480.1 crore as of 30 September.
As part of its debt reduction exercise, Bharti Airtel had in December announced that it, along with another group entity, will sell a combined 20% in its DTH arm, Bharti Telemedia Ltd, to private equity firm Warburg Pincus for $350 million.
In November, Bharti Telecom increased its shareholding in Bharti Airtel from 45.48% to 50.1% by acquiring over 1.85 million shares from another promoter firm, Indian Continent Investment Ltd.
Airtel had in October said that it has been approached by a few global investors to acquire a significant stake in its tower arm Bharti Infratel Ltd and that if their interests are accepted, it could result in such investors acquiring control of Bharti Infratel. As of December-end, Bharti Airtel, along with its subsidiary Nettle Infrastructure Investments Ltd, hold 53.51% stake in Bharti Infratel.
The battle for market share in the telecom sector has also led to faster-than-expected consolidation with Airtel acquiring Tikona Digital Networks, Telenor India and the consumer mobile businesses of the Tata group.
Airtel’s rivals Idea Cellular and Vodafone India in March announced a merger which would create India’s largest telecom company. The companies expect the merger to complete in the first half of this calendar year. Together, Idea and Vodafone India would be in a better position to compete with Reliance Jio.
Idea Cellular had in January also announced that its promoters will invest Rs3,250 crore and the board has constituted a panel to evaluate ways to raise an additional Rs3,500 crore to strengthen its balance sheet amid intense competition.