Bharti Airtel May Sell Larger Stake in Tower Arm to Fund 4G Expansion in India

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Bharti Airtel said that it might sell a large stake in its tower unit, Bharti Infratel, to generate funds that will be used to bolster its 4G network and better compete with Reliance Jio, which became profitable in the third quarter. Bharti Airtel and its wholly-owned subsidiaries own 53.51% in Bharti Infratel. The telco had in March last year sold a 10.3% stake in Bharti Infratel to a global consortium of private equity firm KKR and CPP Investment Board for $952 million, followed by another 3.65% stake in a secondary sale for Rs 2,570 crore in August last year. It had also raised another Rs 3,325 crore by offloading a 4.49% stake to global investors.


Vittal said the company’s immediate objective is “to grab a disproportionate share of 4G devices and 4G primary SIM slots on its network” to offset the impact of ARPU erosion in the telco’s running battle for market share with Mukesh Ambani’s Jio.

“The board has approved divestment of a majority stake in Bharti Infratel, and the next block would have to be a sizeable amount, although there is no immediate decision yet,” Bharti Airtel's global chief financial officer, Nilanjan Roy, said during an earnings call while responding to an analyst’s query on a possible significant stake sale in the tower arm to generate fresh resources amid Airtel’s elevated capex requirements through FY19.

Roy said that the objective of this stake sale is to build the strategic value of our underlying telecom business, sustain revenue market share and grow the data market. He added that the impact on Airtel’s overall leverage and operating income would be assessed before any potential stake sale in the tower arm.

The Sunil Mittal-led telecom operator's capital expenditure levels in FY18 are likely to surpass the Rs 25,000 crore figure by around Rs 1,000-1,500 crore due to the aggressive expansion of 4G networks. Reports said that Airtel's FY19 capex guidance is expected to match the current year's capex.

The telco's chief executive officer Gopal Vittal has said that the worst may be over for Airtel in terms of revenue erosion. He added that current pricing levels are not sustainable and it has to lift in near term.

Bharti Airtel has reported a decline in its net profit for the seventh successive quarter at Rs 306 crore. The telco's net profit plunged 39.3% in the third quarter which ended December 21, 2017, from Rs 504 crore net profit for the same quarter last year, largely impacted by lower interconnect charges (IUC).

“Over the next 9-12 months, we will fight aggressively with Jio for market share, and our immediate aim is to get a bigger chunk of the incremental share of 4G primary SIM slots on our network,” Vittal was quoted as saying.

Airtel's consolidated revenues stood at Rs 20,319 crore, down 8.4% year-on-year (a reported drop of 12.9%) on an underlying basis. Its India revenues for stood at Rs 15,294 crore, declined by 11.3% year-on-year (15.1% on reported) on an underlying basis, adjusted for the impact in the reduction of domestic termination rates, it said.

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