Bharti May Sell 5% in Tower Arm In­fratel to Raise Up to .₹ 3,700 cr

Telco may use pro­ceeds to cut debt ahead of up­com­ing spec­trum auc­tion; UBS set to man­age sale process

The Economic Times - - Companies - Our Bureau

New Delhi: Bharti Air­tel is likely to off­load around 5% stake in its tower unit Bharti In­fratel shortly and use the pro­ceeds to cut back debt at a time In­dia’s No.1telco is pre­par­ing for an­other spec­trum auc­tion.

At cur­rent mar­ket cap­i­tal­i­sa­tion of .₹ 73,306.18 crore for Bharti In­fratel, a 5% stake sale could help Bharti Air­tel raise close to .₹ 3,700 crore. Shares in In­dia’s only listed tele­com tower com­pany ended Wed­nes­day at .₹ 386.50, down 2.5%, while Bharti Air­tel closed 0.6% lower at .₹ 356.50 on the BSE, un­der­per­form­ing a flat mar­ket. “Most likely it will be via a block trade in the open mar­ket,” a per­son fa­mil­iar with the mat­ter said.

Bharti Air­tel holds around 71.7% in In­fratel, but has been re­duc­ing its stake pe­ri­od­i­cally in the com­pany, which was listed in 2012. In­fratel ended the Oc­to­ber-De­cem­ber 2015 quar­ter with 88,055 tow­ers. An­other per­son said that Su­nil Mit­tal-owned Bharti Air­tel has ap­pointed UBS to man­age the sale process, who is check­ing for for­eign and lo­cal in­vestor in­ter­est for the stake. “The stake sale is likely to hap­pen at a dis­count to mar­ket price. Usu­ally, the dis­count is around 5%,” the sec­ond per­son added.

A Bharti Air­tel spokesper­son de­clined to com­ment. UBS didn’t re­spond to an emailed query for com­ment. This isn’t the first time Air­tel has cut its stake in the tower busi­ness. In Au­gust 2014, Air­tel had raised close to .₹ 2,140 crore by sell­ing a 4.5% stake in In­fratel, in or­der to com­ply with a reg­u­la­tion on min­i­mum pub­lic hold­ing and gen­er­ate funds as the se­cu­ri­ties law re­quires a listed com­pany to have a min­i­mum of 25% pub­lic share­hold­ing. A year later, it raised .₹ 1,925 crore by sell­ing 55 mil­lion shares in In­fratel, fur­ther re­duc­ing its stake.

“The move was ex­pected since the com­pany will soon face spec­trum auc­tions and it needs room for lever­age to buy air­waves,” said an in­dus­try ex­pert who didn’t wish to be named.

Air­tel’s con­sol­i­dated net debt at the end of De­cem­ber 2015 in­creased to $11.91 bil­lion (.`81,000 crore) from $10.77 bil­lion in the quar­ter ended Septem­ber. It has re­cently also spent to beef up its 4G spec­trum, buy­ing Video­con’s in six cir­cles for .₹ 4,428 crore, and Air­cel’s in eight cir­cles for .₹ 3,500 crore.

While the net debt to EBITDA ra­tio for the Oc­to­ber-De­cem­ber quar­ter stood at 2.34, that could in­crease to 3.1 post the two buys, ac­cord­ing to Moody’s.

The stake sale comes at a time when the tele­com de­part­ment is in the midst of pre­par­ing for a mega auc­tion of band­width across 700 MHz, 800 MHz, 900 MHz, 1800MHz, 2300 MHz and 2500 MHz bands in July. An­a­lysts, though, say Bharti Air­tel, due to its re­cent spec­trum buys, has ad­e­quate data band­width and is in a po­si­tion to just pick and choose its tar­gets in the sale.

Since its IPO price of .₹ 220 in De­cem­ber 2012, Bharti In­fratel’s stock plunged to an all-time low of .₹ 148 in June 2013, mir­ror­ing the trou­bles in the tele­com in­dus­try, and con­se­quently the tower com­pa­nies. But an up­swing in the for­tunes of the sec­tor amid net­work ex­pan­sion and a rel­a­tively clearer reg­u­la­tory en­vi­ron­ment, meant a turn­around in the for­tunes of the tower sec­tor as well, in­clud­ing the fi­nan­cials of Bharti In­fratel.

Amid choppy mar­kets, the com­pany’s stock has risen over 4% in the last year, hit­ting a high of .₹ 505. It re­ported a 12% rise in its net prof­its to .₹ 565 crore for the Oc­to­ber-De­cem­ber quar­ter, as mo­bile car­ri­ers in­vested ag­gres­sively in 3G and 4G net­work ex­pan­sion and roll­outs amid surg­ing data con­sump­tion.

Ac­cord­ing to Moody’s, con­tracts from Re­liance Jio In­fo­comm cou­pled with data-net­work ex­pan­sion by in­cum­bent mo­bile op­er­a­tors have led to an in­crease in ten­ancy ra­tios for the In­dian tower com­pa­nies, giv­ing a filip to In­fratel’s busi­ness.

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