Singtel to invest Rs 26.5 bn in Bharti Telecom, ups stake to 48.9%

Singapore-based Singtel will invest Rs 26.49 billion in Bharti Telecom, lifting its stake to 48.90 per cent in the parent company of country's top mobile operator Bharti Airtel.

The investment, which will be made through preferential allotment of shares expected to be completed by March this year. As a result of its investment in Bharti Telecom, Singtel's stake in Bharti Airtel will increase by 0.9 percentage points to 39.5 per cent.

Singtel currently holds 47.17 per cent stake in Bharti Telecom whereas Bharti Enterprises, run by Sunil Bharti Mittal, hold over 50 per cent stake in the company. The funds raised will be used towards debt reduction.

"This is a good opportunity for us to deepen our strategic partnership with Airtel. While there are currently headwinds in India, we take a long-term view of our investment in Airtel which continues to be a strong market leader in a region with rapidly increasing smartphone penetration and mobile data adoption," Arthur Lang, CEO International at Singtel said in a statement.

The country's telecom sector has been hit hard by a tariff war since the entry of Mukesh Ambani-owned Reliance Jio in September 2016. The free voice and cheap data offers from Jio had forced the incumbent operators including Airtel to match the low rates, hitting their profitability. Ever since the launch of Jio's services, most of the operators have been reporting lower revenues. The telecom industry is undergoing through a financial stress and a government appointed panel has recently proposed a slew of measures to ease the stress. The panel has approved a longer tenure for deferred spectrum payments and reduction in interest rates for delayed payments.

The relief package for telecom operators is expected to be placed before the Union Cabinet shortly.

However, Airtel said the fresh round of investment highlights the confidence of Singtel in Airtel, and the increased attractiveness of the Indian telecom sector following the recent consolidation.

"Singtel International Investments will be allotted up to 85,450,000 new equity shares in Bharti Telecom at an issue price of Rs 310 per equity share. This will increase Singtel's stake in Bharti Telecom by up to 1.7 per cent for an aggregate consideration of approximately Rs 26.5 billion," Singtel said. Bharti Telecom holds approximately 50.1 per cent of the share capital of Airtel.

The investment comes within 23 months of Singtel's participation in Bharti Telecom's right issue of Rs 25 billion, which was completed in February 2016.

"Airtel shares a nearly two decade-long relationship with Singtel, which has only become stronger over the years," Deven Khanna, Managing Director, Bharti Telecom, said.

The shares of Airtel today closed at Rs 439.5 a unit, up by 4.2 per cent, at the BSE

Pricing pressures and regulatory changes led to a 39 per cent year-on-year (y-o-y) drop in Bharti Airtel's December quarter net profit at Rs 3.05 billion. The net debt of the company stood at Rs 917.14 billion as on December 31, 2017.