Bharti Airtel Ltd. plans to take its African business public to bring down its debt even as India’s largest wireless carrier is locked in a tariff war in the world’s second largest telecom market. That will only partly help it reduce its debt.
Even if it sells 49 percent stake in the African business at highest valuations prevailing in the African industry, Bharti Airtel would fetch close to Rs 14,122 crore, according to data compiled by BloombergQuint. This would bring down its debt by just 15 percent.
The company is looking to list its wholly-owned subsidiary Bharti Airtel International (Netherlands) B.V., it said in a statement. The discussions are exploratory and there is no certainty of any final decision or outcome.
Bharti Airtel International (Netherlands) is the holding company of all African business of Bharti Airtel. It has operations is 14 African countries and ranks among the top three players in all the markets.
How Has Africa Performed?
Bharti Airtel managed to turn around the Africa business in the past few quarters and that supported the consolidated profits of the company. Growth in net profit has been driven by cost cuts, also improving the margin.
The Africa business generated a revenue of little more than Rs 15,000 crore for the nine months ended December. It has more than 8.4 crore subscribers in 14 African countries with an average revenue per user of close to Rs 205.
How Much Can Bharti Airtel Get?
Listed peers of Bharti Airtel in Africa – like Maroc Telecom, MTN, Telekom Networks Malawi, Vodacom Tanzania, Mobinil Telecommunications and Safaricom—trade in the range of six to 10 times their operating income for the year ending March.
While Bharti Airtel has not disclosed how much stake it plans to sell, it cannot offload more than 49 percent if it wants to retain control of its subsidiary. Selling 49 percent stake at 10 times valuation will give Bharti Airtel close to Rs 14,122 crore.
The operator could also issue fresh shares and the proceeds can be used to either repay debt or to fund expansion.
Bharti Airtel’s consolidated leverage rose for the third straight quarter amid growing competition triggered by a tariff war unleashed by Billionaire Mukesh Ambani-owned Reliance Jio Infocomm Ltd., India’s newest telecom operator.
The company had a net debt of more than Rs 90,000 crore as of December. It has lined up capital expenditure worth at least Rs 25,000 crore for the financial year 2018-19
This could be Bharti Airtel’s third attempt to pare stake in business operations other than India wireless business. Earlier, the Sunil Mittal-owned company pared stake in its tower arm Bharti Infratel Ltd. and in its DTH business. The proceeds were used repay debt and fund capex.