Airtel kicks off monetisation of digital businesses

Buys war burg pincus’ s 20% stake ind th arm

Bharti Airtel on Wednesday initiated the first step to unlock the value of its digital businesses by setting up a special committee of its board of directors.

Airtel said the committee would evaluate various options for the reorganisation of businesses and shareholding structure of the company and its various subsidiaries to achieve the required flexibility and sharper focus on digital and nontelecom businesses. This, it said, would enable any unlocking of enhanced value for its stakeholders.

The company also announced the acquisition of Warburg Pincus’s 20 per cent stake in its direct-tohome (DTH) arm.

Airtel, which is locked in a fierce competition with Reliance Jio in the telecom space, aims to align the ownership of its consumer-facing businesses, with the Warburg Pincus transaction. Separately the Sunil Mittal-led company is looking to scale up and monetise its digital businesses, which include music streaming app Wynk, content platform Xstream, cloud-based communication platform Airtel IQ, among others.

The digital assets have around 190 million customers and contribute around ~100 crore in revenue annually. The company hopes to increase it to over ~1,000 crore, Mittal said in a recent media interaction Warburg Pincus had acquired 20 per cent in Bharti Telemedia in 2017 and is now exiting the venture for a total consideration of ~3,126 crore. This will be in the form of 36.47 million equity shares in Bharti Airtel at a price of ~600 per share and up to ~1,037 crore in cash.

Post the transaction, Warburg would hold 0.66 per cent stake in Bharti Airtel.

In a statement, Airtel said it would issue its shares to a Warburg Pincus affiliate at a premium of around 0.50 per cent to the floor price determined as per ICDR regulations. Of the remaining consideration, ~938 crore will be paid on cash. An additional ~100 crore could be on account of minor customary adjustments at the close of transaction.

“The proposed transaction is part of Airtel’s strategy to align the shareholding of its customer facing products, services and businesses under the same holding group. A full control and ownership over Bharti Telemedia allows Airtel to offer differentiated and converged solutions to customers so as to promote “One Home” strategy,” the company said in a regulatory filing.

Harjeet Kohli, group director, Bharti Enterprises, said, “DTH is an integral part of our Homes strategy and this transaction is another step towards simplifying the shareholding of our customer-facing businesses providing structural flexibility and ease of implementation."

The DTH business contributes around 4 per cent to the company’s India revenue. In the third quarter of FY2021, the DTH business contributed~789 crore to the top line.

Last year, Jio Platforms, which houses the telecom and digital assets of Reliance group, raised over ~1.5 trillion by selling 33 per cent stake in the company to private equity firms, sovereign funds and technology giants such as Google and Facebook.

“Historically, Bharti Airtel has a strong track record of asset monetistion and India Ratings believes that any further monetisation efforts by Bharti Airtel would help the company to deleverage its balance sheet,” said Prashant Tarwadi, director, India Ratings and Research.