Flush with cash, Bharti Infratel eyes M&As

Bharti Infratel won't buy tower arms of its Africa operations as it focuses on the Indian subcontinent, say bankers

Bharti Infratel, the telecom tower arm of Bharti Airtel Ltd, is preparing a war chest to fund mergers and acquisitions in India and in the Indian subcontinent, taking advantage of falling valuations.

The company generated about Rs 700 crore of free cash in September quarter and was looking at ways to deploy its war chest of Rs 3,000 crore, said bankers. They said the company was also looking at increasing dividend to its shareholders and buying back shares. It has plans to make a recommendation in this regard to the board of directors by the end of the financial year. A decision is expected by April.

A Bharti Infratel spokesperson said, "We are always open to opportunities, provided there is a strategic fit and it enhances shareholders' value. However, as a policy, we do not comment on speculation."

The company's stock was trading at Rs 158 a share, down 18 per cent since January. The falling share price since listing is a reason why shareholders of Bharti Infratel investors are not betting on the company.

Bankers say Bharti Infratel has ruled out buying the tower arms of its African operations as it wants to retain focus on the Indian subcontinent. The tower arm of Africa operations are valued at $1.8 billion.

Bankers said in order to buy any company in India, Bharti Infratel would have to pass the Competition Commission of India's test. The company is the largest tower infrastructure provider in India and operates both as a standalone entity and as a 42 per cent equity shareholder in Indus Towers, a three-way venture between Vodafone, Idea and Bharti. "Hence, it will be difficult for Bharti to buy a company like GTL Infrastructure," a banker said.

As of March 31, Bharti Infratel has 35,119 (owned-and-operated) tower sites in 11 telecom circles, while Indus operated 1,11,819 sites in 15 telecom circles.

Bharti Infratel and Indus together operate 1,45,000 towers, making it a giant in the industry.  But what is worrying investors is that the company’s tower additions remained muted for the second straight quarter, while average rent per tower remained broadly flat.

Bankers said deploying cash in the coming years will be important for the tower company, as it has reduced its own capital expenditure significantly due to lack of customers.

As Bharti Airtel is already present in Sri Lanka and Bangladesh, it will look for M&A opportunities in these countries.