India: Airtel explores options to sell tower business to PE funds

A pedestrian looks up while walking past a Bharti Airtel Ltd. store in Mumbai, India, on Saturday, April 21, 2018. Photographer: Dhiraj Singh/Bloomberg

Bharti Airtel Ltd is exploring the option of completely selling its stake in its tower infrastructure business to private equity funds so that it can sharpen its focus on its core business of offering wireless services, said two people familiar with the plan.

A stake sale in the merged entity combining its telecom tower unit, Bharti Infratel Ltd, and Indus Towers Ltd may, however, take place only when valuations improve from the current subdued levels, said one of the two people cited above.

A potential deal will allow India’s second-largest telecom operator by revenue to reinforce its war chest to take on market leader Reliance Jio Infocomm Ltd in this intensely competitive market. Since its entry in September 2016, Jio, the telecom arm of Reliance Industries Ltd, has rattled incumbents with a brutal price war, forcing them to either merge or exit.

Jio’s strategy to garner subscribers through cheap data has prompted rivals to pump in funds in the cash-guzzling telecom business. As of 30 June, Airtel had a consolidated net debt of 1.16 trillion.

“Sunil Mittal is very clear that he wants to compete fiercely with Jio. He will hence divest all non-core infrastructure and put money into mobile network and compete,” the second person said, requesting anonymity. “But the tower stake sale may take some time as currently valuations don’t look too great. This isn’t the ideal time to sell. The tower stake sale will happen when prices improve.”

“It makes sense for them to completely exit the tower business as they won’t be a majority stakeholder in the merged entity anyway,” a Mumbai-based analyst said on condition of anonymity. “Based on current market cap, Airtel would be able to raise at least 35,000 crore if it sells all its stake in the Indus-Infratel merged entity. They can use this to reduce debt so that they are in a better position to raise money for 5G.”

Airtel said in November 2017 that it had been approached by a few “global investors” to buy a significant stake in its tower unit, Bharti Infratel. If their interests are accepted, this “could result in such investors acquiring control of Bharti Infratel”, the company had said then.

To be sure, Bharti Infratel and Indus Towers are in the final phase of completing their merger and only government approval is pending. Indus Towers was started as a joint venture between Vodafone India, Bharti Infratel and Idea Cellular.

The two tower companies had in April last year agreed to merge their businesses to create the world’s largest telecom tower company outside China. The combined entity will own more than 163,000 towers, second only to China Tower Corp. Ltd.

Once the merger is completed, Airtel will hold between 33.8% and 37.2% in the merged entity. Vodafone Group Plc will own between 26.7% and 29.4%. Airtel and Vodafone will have equal rights in the merged entity.

Airtel and its rival operators need to raise cash ahead of a planned auction of airwaves in January by the telecommunications department for the launch of 5G services. The operators are already saddled with a mountain of debt, largely due to spectrum-related dues to the government.

Raising more funds is critical for Airtel as its revenue from the domestic wireless business was 10,724 crore for the June quarter. Reliance Jio, in comparison, generated 11,679 crore in operating revenue in the same quarter.

This article was first published on livemint.com

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.