SingTel wants bigger slice of Bharti Airtel

Could pay up to Rs 3,000 crore for 1.52 per cent.

Singapore Telecommunications (SingTel) is increasing its interest in Bharti Airtel, the country's leading mobile service provider, to 31.95 per cent from 30.43 per cent currently. SingTel owns 15.57 per cent in Bharti Airtel directly. It owns another 14.86 per cent from its 32.81 per cent stake in Bharti Telecom which holds 45.3 per cent in Bharti Airtel.

SingTel, through its arm called Pastel, has entered into a conditional share-purchase agreement with a Bharti Group entity to purchase 730,000 shares in Bharti Telecom. After the acquisition, SingTel's effective interest in Bharti Telecom will increase to 36.16 per cent from 32.81 per cent. The remaining equity in Bharti Telecom is owned by the Bharti Group.

This is in line with Singtel's strategic focus on maximising the value of its existing businesses, said a press release from the Singapore-based company.

Pastel would fork out between Rs 1807.3 crore and Rs 3,008.4 crore for the acquisition which is based on, inter alia, the prevailing stock market price of Bharti Airtel. However, the payment schedule is staggered for more than a year after the agreement takes effect from 12 November. Bharti Airtel did not make any comment on the sale.

In the first tranche, which falls on November 12 or any other date agreed upon by both the parties, Pastel will pay an initial sum of Rs 240 crore. Full 365 days after the first tranche, the payment of the second tranche of around Rs 1,567.3 crore will be paid. After 540 days of the deal, the third tranche of not more than Rs 1,201.1 crore will be paid.

Bharti Airtel, like most other telecom companies, has seen its shares fall in the stock markets in the last few weeks. Its market capitalisation as on October 30 stood at Rs 1,10,925 crore. The deal with Singtel announced today has valued the company between Rs 1,18, 901 crore and Rs 1,97,921 crore.

Singapore's sovereign wealth fund, Temasek Holdings, owns a majority stake in SingTel, and already owns over 5 per cent of Bharti Airtel.

On Friday, Bharti Airtel announced its second-quarter results which were below expectations. It recorded a net profit of Rs 2,321 crore in the quarter ended September 30, which was 13 per cent higher than the net profit in the same quarter last year.

However, perhaps for the first time, the company gave a cautious warning for the future. Bharti Group Deputy CEO Akhil Gupta said it might face a short-term impact on profit growth. “With this competitive intensity and irrational pricing in some pockets, it is possible in the short-term we could see some impact on profit growth.”

The warning was not taken very well by the markets. The Bharti Airtel stock fell 6.38 per cent to Rs 292.15 on the Bombay Stock Exchange.