India’s second-largest telecommunication company Bharti Airtel is planning to divest its non-core assets and is looking forward to raising capital. The current ongoing divestment will begin with the company selling 10.3% of its stake in its tower business Bharti Infratel to private equity investment firm Kohlberg Kravis & Roberts (KKR) and the Canada Pension Plan Investment Board (CPPIB) for 6,193.9 crores.
This stake sale is one of many deals that are under the pipeline. Being India’s major telecom player is no easy achievement with Jio in the fray, and snapping up more customers every quarter keeps Airtel at bay. With these deals, the company is trying to bring down its massive debt. The company even has to pay the Adjusted gross revenue(AGR) of almost 58,200 Crore rupees, of which it has paid 18,000 crores. The current debt level of Bharti Airtel stands at around 97500 Crore, which mainly involves AGR dues and spectrum payments.
However, the company does not have to pay the whole AGR amount in one go and last year adopted the four-year moratorium on the spectrum and AGR payment which expects the company to save up to 35,000 to 40,000 Crore.
This deal between KKR, CPPIB, and Bharti Airtel involves Bharti Airtel of 10.3% stake at a premium price of almost 4% at Rs 325 per share. This stake sale will bring down the company’s ownership to 61.7% of nearly 72%. It is not the first time KKR was investing in any of Bharti’s ventures; even in 2008 and 2015 company had invested in the company. Delighted by the investment, the chairman of Bharti Airtel, Sunil Bharti Mittal, said, “This investment by a consortium of marquee long-term investors underlines the confidence of the global investors in India’s growth story and the government’s Digital India initiative… It further reinforces the positive outlook for the telecom infrastructure sector.”
Also, Bharti Infratel is India’s largest telecom tower company. It is a joint venture between three big telecom entities like Bharti Infratel, owned by Bharti Airtel, Vodafone India, and Aditya Birla Telecom. Bharti Infratel currently owns almost 90,000 towers and has a market share of 9.8%.
What other projects does Airtel look at?
It is not the only project in recent times; Bharti Airtel has looked at to raise money. Last year, the company sold its tower operations in Tanzania for 1300 crore. Airtel boasts a strong tower network of almost 1400 towers, even in Tanzania. The company is focusing on staying in an asset-light business model. The company is working actively in bringing the direction to reduce debt as it sold more towers in other African nations like Madagascar and Malawi.
Besides selling the tower business, Airtel is also looking at significant ways to raise its revenue. The company has seen consistent growth in its average revenue per user (ARPU) in the last few quarters. The chairman of the company Bharti Mittal made it clear In an interview given to Economic times, the chairman of the Bharti Mittal made it clear: “One needs to generate capital and after 25 years, one needs to give something back to the shareholders. So, it needs to get to the right level. My desirable level is Rs 300; that will be bold. We are not anywhere close to it but to get to Rs 200 will be a very justified approach to tariff hike.” Even analysts at Credit Suisse expect the ARPU to reach Rs 300 after a full 5G rollout.