Axiata eyes Airtel's Lanka business

Axiata, the Malaysia-based telecom operator has approached Bharti Airtel to acquire the Indian operator's business in Sri Lanka, according to people privy to the development.

Axiata operates as Dialog Axiata in Sri Lanka. While Bharti Airtel has an estimated share of eight to nine per cent in the Lankan market, Dialog Axiata accounts for 40 per cent market share.

The value of the offer could not be confirmed. While Axiata did not respond to e-mail queries and phone calls from Business Standard, a Bharti Airtel spokesperson said, "As a policy, we do not comment on market speculation."

Airtel Lanka, the operating company of Bharti Airtel in that country, has 1.7 million customers across 25 administrative districts, according to a Bharti Airtel statement. The company also offers 3.5G services (a grouping of disparate mobile telephony and data technologies to provide better performance than 3G systems, as an interim step towards deployment of 4G capability) in major Sri Lankan towns and has a distribution network of 42,000 retailers, the statement added.

In January 2009, Bharti Airtel had announced the company would invest about $200 million in Sri Lanka till 2012.

Axiata-controlled Dialog Axiata is the market leader in Sri Lanka. It is followed by Sri Lanka Telecom (Mobitel), which has a market share of 21 per cent, and Etisalat (20 per cent market share), according to the Telecommunications Regulatory Commission of Sri Lanka (TRCSL). Bharti Airtel and Hutchison together account for the remaining 19 per cent market share, according to TRCSL data.

An analyst tracking Bharti Airtel said the Sri Lankan market wasn't very big and investing more money might not be logical for Airtel Lanka. Selling the business, however, would reduce Bharti Airtel's debt and the company would get better headroom to invest in African countries, where it was growing at a faster rate, the analyst said.

People in the know say Axiata is also believed to have approached Hutch to acquire the latter's Sri Lankan operations. However, the two companies couldn't reach a consensus on the valuation of the business.

Hutch did not respond to Business Standard queries.

In 2009, Axiata had placed a bid to acquire Tigo, then the third-largest operator in Sri Lanka. However, Tigo was acquired by Etisalat, as Axiata had pulled out because of the steep valuation. Dialog's market capitalisation stands at $575.3 million.

It is backed by $6 billion in Axiata Group revenues. According to a recent Axiata release, last year, Dialog had reported a 24 per cent rise in revenue.