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
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.