New Delhi: Bharti Airtel Ltd will transfer as much as 32% stake it owns in tower company Bharti Infratel Ltd to wholly owned unit Nettle Infrastructure Investments Ltd to explore opportunities to monetize the asset, the telecom operator said on Tuesday.
Airtel and Nettle own 50.33% and 3.18%, respectively, in Bharti Infratel now. After the transfer of stake, which is scheduled to be completed on or after 18 March, Airtel and Nettle will own 18.33% and 35.18%, respectively, the company said in an exchange filing. The move is in line with Airtel’s earlier stated strategy to sell a controlling stake in Bharti Infratel, which is in the midst of a merger with Indus Towers.
In October 2017, Airtel said it has been approached by a few global investors to acquire a significant stake in Bharti Infratel, and if their interests are accepted, this could result in such investors acquiring control of Bharti Infratel. In a bid to trim debt, Bharti Airtel had also announced the sale of 20% stake in DTH arm Bharti Telemedia Ltd to Warburg Pincus for $350 million.
Triggered by intensive competition after the entry of Reliance Jio Infocomm Ltd in September 2016, which brought down tariffs to rock bottom and hit revenue streams, operators have been selling or paring stakes in their non-core assets.
Vodafone India and Idea Cellular, now merged, had in November 2017 separately agreed to sell their respective standalone tower businesses in India, totalling 20,000 towers, to ATC Telecom Infrastructure Pvt. Ltd (ATC) for ₹7,850 crore.
Vodafone Idea now also plans to monetize its stake in the merged entity of Bharti Infratel and Indus Towers.
“We are expecting this (Indus-Infratel merger) to be completed in early Q1 FY20 (April-June). And so as soon as that completion happens, we have the option to monetize this asset,” Akshaya Moondra, chief financial officer of Vodafone Idea said on 7 February in a post-earnings conference call with analysts.
The stake sale exercise is crucial for both Airtel and Vodafone Idea as their profitability have been severely hit after Reliance Jio’s entry and at the same time they need to invest in networks to upgrade capacity.
Vodafone Idea posted a loss of ₹5,004 crore in the December quarter (Q3) while Bharti Airtel Ltd’s profit plunged 72% to ₹86 crore in Q3 from ₹306 crore a year earlier. Vodafone Idea’s earnings before interest, taxes, depreciation and amortization (Ebitda) from wireless operations in India at ₹1,136.8 crore is the lowest among all operators. Reliance Jio, in comparison, posted Ebitda of ₹4,053 crore while Bharti Airtel Ltd reported ₹1,949.8 crore.
However, both Airtel and Vodafone Idea have announced plans for significant fund infusion from their promoters. Vodafone Idea in January said that its board had approved a rights issue of ₹25,000 crore to existing eligible equity shareholders while Bharti Airtel’s promoters and Singapore’s sovereign wealth fund GIC Pte Ltd will together invest ₹16,785 crore as part of a rights issue.
Bharti Airtel hopes that the fundraising will strengthen its balance sheet and give it the financial flexibility to grab future opportunities. Of the rights entitlement of ₹16,785 crore, the promoter and promoter group will subscribe to ₹11,785 crore, while GIC will subscribe to ₹5,000 crore by way of renouncement in their favour. The promoter and promoter group have also reserved the right to subscribe either itself or through investors for additional shares in the issue, including in the event of under-subscription by the public.
The telecom operator is also preparing an IPO for its Africa unit, after having raised $1.25 billion in October in a pre-IPO fund-raising round from large investors, including Warburg Pincus, Temasek, Singtel and SoftBank Group International. The company plans to hold the IPO for Airtel Africa by June-July.