Bharti Airtel, which has become the world's fifth-largest mobile operator in subscriber terms, today said that its debt position following the $10.7-billion acquisition of Zain Africa is "manageable".
The company had taken a loan of $9 billion to acquire Zain Telecom's Africa operations.
"The cost of the dollar financing is 2.25 per cent above the Libor, and the recurring cost for acquisition is only $200 million per year," Akhil Gupta, group deputy CEO & MD, said.
Gupta, one of the chief architects of the Zain deal, also said that even with the 3G spectrum fee (which could go up if Bharti wins the BWA auction), the debt position is comfortable.
"With 3G auction and this transaction, our net debt ratio to EBITDA is around 2.75. Our operating free cash flow is $2 billion, which should help us in bringing down the net debt to EBITDA ratio," he added.
Gupta said that Bharti has a number of options to raise funds, such as selling equity in its tower company, to pre-pay the loans and lower the interest outgo.
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"We have complete freedom to prepay the loan. We have agreements with all the bankers in this regard," he said.
Bharti has to pay Rs 12,295 crore towards 3G spectrum auction fees for 13 circles, for which it has won radio waves.
Of the $10.7-billion enterprise value of Zain, Bharti has paid $8.3 billion upfront and pledged to pay another $700 million after a year.
It would also take over about $1.7 billion of Zain’s debts as on December 31, 2009.
Bharti raised debt from the State Bank of India and a consortium of foreign banks with lead-arranger and lead-advisor Standard Chartered Bank committing the highest amount -- $1.3 billion -- followed by Barclays at $900 million.