Bharti Airtel Plans To List Africa Unit In One Year, Says Singtel

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Bharti Airtel Ltd. plans an initial public offering of its profitable African business in the next one year to pare debt amid an intense tariff war in India.

The share sale will give flexibility to its balance sheet, Singapore Telecommunications Ltd, which owns 48.9 percent in Bharti Telecom Ltd.—promoter company of Bharti Airtel, said in its earnings briefing.

India’s largest Telecom operator is locked in a tariff war triggered by Billionaire Mukesh Ambani-owned Reliance Jio Infocomm Ltd, hurting its profitability and revenue. That pushed up its debt.

Bharti Airtel is looking to list its wholly owned subsidiary Bharti Airtel International (Netherlands) B.V.—holding company of all the African operations—it had said in an exchange filing. The unit of the Sunil Mittal-owned company is present in 14 African countries and ranks among the top three players in all markets.

How Has Africa Performed?

Bharti Airtel continues to gain footing in Africa even as its India business is under pressure.

Revenue generated from the Africa business is little more than Rs 20,000 crore for the 12 months ended June. Growth in net profit came on the back of the company’s cost-saving initiatives, which also reflected on the margins. Bharti Airtel’s profit margin from Africa stood at 36.4 percent in the June quarter.

The Africa unit has more than 9.1 crore subscribers and an average revenue per user of close to Rs 197.

How Much Can Bharti Airtel Get?

The enterprise value of listed peers of Bharti Airtel in Africa—Maroc Telecom, MTN Group, Vodacom Group, Econet Wireless and Safaricom—is at five to nine times their 2018-19 earnings before interest, tax, depreciation and amortisation, according to Bloomberg.

While Bharti Airtel hasn’t disclosed how much stake it plans to sell, it can’t offload more than 49 percent if it wants to retain the control of its subsidiary. If it sells a 49 percent stake at nine times valuation, Bharti Airtel will fetch close to Rs 14,116 crore, according to data compiled by BloombergQuint.

The operator can 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 a bruising tariff war led by Telecom upstart Reliance Jio.

The company has a net debt of more than Rs 1,02,903 crore as of June 2018. It spent a little more than Rs 8,200 crore on capital expenditure in the quarter ended June and plans to spend another Rs 19,000 crore over the financial year ending March 2019.

This will be Bharti Airtel’s third attempt to pare stake in operations other than India wireless business. Earlier, the Sunil Mittal-owned company sold stake in its tower arm Bharti Infratel Ltd. and in its DTH business.

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