SingTel likely to raise stake in Airtel promoter; telco to become a foreign entity

Singapore-based telecom major SingTel may raise stake in Bharti Telecom, a promoter entity of Airtel, to more than 50 per cent, making the country's first private telecom services provider a foreign entity.

Bharti Telecom is the single-largest shareholder in Bharti Airtel with about 41 per cent equity stake, according to the BSE data. Sunil Bharti Mittal and his family currently own around 52 per cent stake in Bharti Telecom.

"Bharti Telecom Limited (Promoter of Bharti Airtel Limited), in order to retire some debt may seek equity from its existing promoter group (which may include its overseas entities) and SingTel in proportionate to its holding," Bharti Airtel said in response to an email query.

 

"Even a marginal increase in foreign equity would take the foreign investment in Bharti Telecom above 50 per cent making it a foreign-owned entity. Once that happens, Bharti Telecom's entire stake in Bharti Airtel Limited will automatically be considered as Foreign Investment," Airtel said.

Foreign shareholding in Bharti Airtel is 43 per cent at present and after the proposed SingTel investment, the total foreign stake would increase to around 85 per cent.

According to sources, Bharti Airtel for the second time has applied for 100 per cent Foreign Direct Investment approval offering clarity on the proposed investment.

The Department of Telecom had earlier this year rejected Bharti Airtel's FDI application as the company had not provided clarity around the foreign investor.

"Bharti Airtel is committed to be compliant with regulatory regime for foreign investment and accordingly has applied for Foreign Investment for 100% to keep further headroom for FII/FPI investments as well," Airtel said.

With the proposed investment, SingTel is likely to hold around 52 per cent in Bharti Telecom which will effectively enhance foreign stakeholding in Bharti Airtel to around 85 per cent from 43 per cent at present.

SingTel, at present, holds around 35 per cent stake in Bharti Airtel.

Bharti Airtel is likely to use the SingTel investment to reduce its debt. Airtel's consolidated net debt stood at Rs 1,16,645.8 crore as on June 30, 2019.

A telecom entity is required to take FDI approval only if the foreign investment limit in the company is to be raised beyond 50 per cent.

Older operators -- Bharti Airtel, Vodafone Idea -- have been locked in a bruising tariff war following the entry of Reliance Jio, backed by India's richest man Mukesh Ambani.

Jio's free voice and dirt-cheap data offering have dented the financial metrics of these operators, deepening the impact of regulatory decisions like cut in termination charges, even though the voice and data usage, per se, have been growing at a scorching pace.

That said, intense market competition has compelled telecom operators to continue infusing investments into network and infrastructure despite financial woes and burgeoning debt.