Bharti Airtel’s UK subsidiary Airtel Africa on Wednesday announced that a group of six global investors led by Warburg Pincus, Temasek, Singtel and SoftBank Group International will invest $1.25 billion (around Rs 9,141 crore) through a primary equity issuance in the company, the proceeds from which will be used to retire part of its around $5-billion debt and for expanding operations.
Bharti Airtel’s UK subsidiary Airtel Africa on Wednesday announced that a group of six global investors led by Warburg Pincus, Temasek, Singtel and SoftBank Group International will invest $1.25 billion (around Rs 9,141 crore) through a primary equity issuance in the company, the proceeds from which will be used to retire part of its around $5-billion debt and for expanding operations. The deal pegs Airtel Africa’s post-money equity value at $4.4 billion and enterprise value at $8.15 billion.
“Airtel Africa subsequently intends an Initial Public Offering (IPO) and use the proceeds primarily for further reduction of debt,” the company said, adding that in most of the markets, Airtel Africa ranks amongst the top two operators and is well placed to capture a significant market share of the rapidly growing data demand across countries. “The transaction will help us further deleverage our balance sheet and boost our capacity to upgrade networks, expand coverage in different markets and achieve rapid growth of Airtel Money across our operations,” Bharti Airtel Africa managing director and CEO Raghunath Mandava said. Singtel in a separate statement said that it will invest $250 million in Airtel Africa.
Brokerage Deutsche Bank in a report said, “Post the deal, the six investors would hold around 28.5% stake in the African operations. Singtel has contributed 20% of monies, which would imply a direct stake of 5.7%”. ICICI Securities said that Bharti has an equity stake of 92-93% in its African operations, which will effectively reduce to 64-65% post the deal.
On debt reduction, ICICI said, “Bharti Airtel had net debt (including finance lease obligation) of $15.8 billion, thus the proceeds will reduce net debt by 8%. Further, Bharti Airtel has refinance obligation of Rs 26,000 crore in FY19 of which it has already refinanced Euro 1 billion (Rs 8,400 crore) debt this month (October), and incremental debt reduction through Africa stake sale. This should significantly reduce refinance obligation burden for Bharti Airtel”.
Analysts also said that Bharti may further sell some of its assets to pare its net debt, which stands at Rs 1.02 lakh crore as of June 2018. For instance, Deutsche Bank expects Bharti to monetise its fiber network in the mid term, while ICICI Securities feels that Bharti’s plans for the Africa IPO indicates that it may further raise funds to reduce debt.
Bharti in a bid to cut costs and turnaround its Africa business monetised its telecom towers and sold its telecom business in Sierra Leone. In 2016, it divested 922 telecoms towers in Congo and 588 in Niger. The sale of telecom operations in Sierra Leone to Orange was also completed in 2016. In the last two years, it has closed tower assets sales in 11 countries and divested 2 country telecom operations for around $3.25 billion.
However, its African operations have been turning around in the last 8-10 quarters, which also shows in its quarterly performance. During the April-June 2018 quarter, the company’s revenue grew 14% YoY to Rs 5,284 crore and Ebitda rose 43% YoY to Rs 1,922 crore. Mobile data traffic rose 75% on an annual basis to 78 billion MBs, while data customers increased by 45% YoY to 26.4 million. Its active Airtel Money customer base increased to 11.8 million, boosting the total transaction value on the platform to $6.1 billion.