Singapore Telecommunications Ltd (Singtel) will invest Rs 2,649 crore in Bharti Telecom to raise its stake in the holding company of Bharti Airtel to 48.9 per cent, just a tad lower than billionaire Sunil Mittal-led promoter group's holding.
Singtel will raise its stake in Bharti Telecom, the promoter of BSE-lised Bharti Airtel, through subscription to preference shares.
Billionaire Sunil Bharti Mittal-led Bharti Enterprise holds over 50 per cent stake in Bharti Telecom.
In the statement, Bharti Airtel said that the funds will be used towards debt reduction.
As on December 31, 2017, the company's consolidated net debt stood at Rs 91,714 crore higher than Rs 91,480 crore in the previous quarter.
"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 in a separate statement.
The preferential allotment of shares which is expected to be closed by March 2018 would allow SingTel to raise its 'economic interest' in Bharti Airtel by 0.9 per cent to 39.5 per cent.
Post the transaction, promoters holding in Bharti Airtel will be 27.08 per cent.
"Airtel shares a nearly two-decade-long relationship with Singtel, which has only become stronger over the years. 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," said Deven Khanna, Managing Director, Bharti Telecom.
The investment comes within a span of two years of Singtel's participation in Bharti Telecom's Right Issue of Rs 2,500 crore, which was completed in February 2016.
"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, Singtel, said.
The move comes even as the Indian telecom sector is facing financial difficulties, and revenue and profitability of established operators have come under pressure in the wake of intense competition in the market.
The turbulence in the telecom sector has seen exit of established corporate groups, namely Tata and Reliance Group, from consumer mobile telephony.
The entry of aggressive new operator, Reliance Jio, and its free voice and dirt-cheap data offerings has prompted incumbent telcos like Bharti Airtel, Vodafone and Idea Cellular to respond, hitting their overall financials and business metrics.
The industry is saddled with nearly Rs 4.5 lakh crore of debt, and taking stock of the financial woes of the sector, the Telecom Commission recently approved a proposal for giving relief to the industry by allowing operators more time to pay for the spectrum they bought in auctions.
The relief package for telecom operators is expected to be placed before the Union Cabinet shortly.
Shares of Airtel today closed at Rs 439.5 a unit, up by 4.2 per cent, at the BSE.
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