Shares in Airtel jump after Singtel lifts stake

(Reuters) - Shares of India's biggest mobile carrier Bharti Airtel Ltd gained 4.2 percent on Monday after Singapore Telecommunications said it was slightly increasing its stake in the holding company to nearly 50 percent.

The investment is a show of confidence in Bharti Airtel at a time when India's telecommunications sector has been hard hit by regulatory changes and a price war since the entry of Reliance Jio, the telecoms arm of Reliance Industries Ltd, more than a year ago.

Singtel said it would spend up to $413 million to lift its stake in Bharti Telecom by up to 1.7 percentage points to 48.9 percent and increase its holding in Bharti Airtel by up to 0.9 percentage point to 39.5 percent. The deal will be done via a preferential share allotment. [L4N1PV1E2]

Shares in Bharti Airtel rose as much as 5.8 percent at one point on the news, their biggest intraday percentage gain since Dec. 7. They bucked a drop in India's broader NSE index and were India's top-performing blue chip stock on Monday.

"It seems like Singtel firmly believes that Airtel will do well. Singtel are long-term holders and the only message the deal sends out is that these are good prices to buy," said PhillipCapital's co-head of research Naveen Kulkarni.

"We are very positive on Airtel ... ARPU (average revenue per user) is something which is beyond the control of the company at this point in time, but I think pricing power will come back soon, probably in six months' time," Kulkarni said.

Airtel's third-quarter net profit, released last month, came in lower than analysts' expectations.

Analysts at Nomura, however, said prospects for rising profitability of Airtel's Africa operations, adequate spectrum availability in the medium term and the company's plan to sell its stakes in tower assets should pave way for a recovery for Airtel in a few years' time.

"Bharti Airtel is set to emerge as a beneficiary of the accelerated industry consolidation and normalising competitive intensity in the wireless space," Nomura analysts said in a note.

India's telecoms regulator cut interconnect usage charges (IUC) - the fees that mobile operators pay each other for calls from one network to another - by more than half and plans to abolish them from 2020.

(Reporting by Arnab Paul in Bengaluru; Editing by Susan Fenton)