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SingTel to up stake in Bharti Airtel for $657 mn; Temasek books huge loss

18 August, 2016

Singapore Telecommunications Ltd (SingTel) will buy out the remaining stake of Temasek in Bharti Telecom Ltd (BTL) for Rs 4397 crore ($657 million or S$884 million) to indirectly push up its holding in Bharti Airtel Ltd (BAL), India’s top telecom service provider.

Privately held BTL is the holding firm of BAL that boasts of being the third largest mobile operator in the world by number of subscribers on its network. BTL owns 45.09% of BAL.

SingTel in turn already owns 39.78% of BTL besides a direct stake of 15.01% of BAL. With the latest deal, its effective total holding in BAL shall increase from 32.94% to 36.27%. It is already the single largest shareholder of BAL.

The Mittal family owns just under 30% effective stake in BAL, largely by virtue of its 51% stake in BTL.

The deal is part of a twin transaction where SingTel  is also acquiring Temasek’s stake in Thai telco Intouch. Temasek, one of the two state investment firms of Singapore, is also the majority stakeholder of SingTel.

Indeed, Temasek is effectively financing the twin transaction worth $1.8 billion through a preferential allotment to hike its holding in SGX-listed SingTel. It will raise its holding marginally by pumping in $1.2 billion into SingTel, it said on Thursday.

The Asian telco said the twin deal will increase its exposure to the high growth telecom sectors in Thailand and India driven by rising mobile data penetration and increased usage.

Chua Sock Koong, Singtel Group CEO, said, “Today, they have a combined mobile customer base of more than 380 million across Asia and Africa. This is a unique opportunity for us to deepen our relationships with two great market leaders.”

“AIS (Intouch arm) and BAL have secured spectrum holdings for the long term and invested extensively in their networks. These investments position both companies well to compete and capture the growth in mobile internet services,” the firm added.

SingTel, which also has exposure to telcos in Australia, Indonesia and Philippines, said it intends to organise an EGM by end-October 2016 and expects to complete the deal by December 2016.

Temasek books a huge loss

Temasek had acquired 4.99% effective stake in Bharti Airtel through a deal worth $2 billion (around Rs 8,100 crore or S$3 billion back then) in FY08. It had entered into an agreement to buy the stake in July 2007 when the stock valuations were nearing their peak.

This was a separate but parallel transaction where Vodafone was selling almost half of its holding in Bharti Airtel after it acquired majority stake in Hutch-Essar. 

Vodafone had picked up 10% stake in Bharti Airtel in 2005 for $1.5 billion. Following its acquisition of a majority stake in Hutch-Essar for $10.9 billion, the British telecom giant decided to exit its strategic stake in Bharti Airtel as it marked a conflict of interest with Hutch-Essar being the key competitor of Bharti Airtel.

Initially it entered into a share sale agreement to sell back 5.6% direct stake in Bharti Airtel for $1.6 billion and last year completed its exit.

Three years ago, Temasek had part exited Bharti Airtel by selling a third of its effective holding. That time too, it sold the stake to SingTel.

That time it pocketed around Rs 1,859 crore ($302 million or S$383.5 million then).  With the latest transaction, it would exit Bharti Airtel with 22% loss in local currency. What’s more, it is taking an even bigger haircut in its own currency, as per VCCircle estimates. Temasek is taking back just about one-third of what I invested in Singapore dollars and half of what it had put in US dollars, into Bharti Airtel, its single biggest India investment to date.

Bharti Airtel, which also has a significant presence in Africa through its large acquisition of Zain’s assets in the continent, faces a challenge with the impending launch of Reliance Jio. Reliance Jio has licence to run 4G services in 22 telecom circles in India, the same as Bharti Airtel.

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SingTel to up stake in Bharti Airtel for $657 mn; Temasek books huge loss

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