Malini Bhupta Moneycontrol News
Bharti Airtel on Tuesday announced the sale of 10.3 percent in tower infrastructure company Bharti Infratel to a consortium of funds advised by KKR and Canada Pension Plan Investment Board for a total consideration of Rs 6194 crore.
The stake sale has been done through a secondary share sale route at Rs 325/share, which is higher than the current market price of R 319/share.
Bharti Airtel will primarily use the proceeds from this sale to reduce its debt. Following the closure of this transaction, Bharti Airtel’s equity holding in Bharti Infratel will stand at 61.7 percent, and that of KKR and CPPIB at 10.3 percent.
This transaction makes it KKR’s second investment in Bharti Infratel. Previously, the funds managed by KKR had invested in Bharti Infratel during the period 2008 to 2015. Post this transaction, the stake held by KKR and CPPIB (combined) will be the single largest public shareholder block.
Commenting on the deal, Sunil Bharti Mittal, Chairman, Bharti Airtel, 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 in particular.
It further reinforces the positive outlook for the telecom infrastructure sector. The long-term investment horizon of the investors aligns well with the capital needs and business cycles of Bharti Infratel.”
Following the announcement of the merger talks between Vodafone and Idea, there was an overhang on Bharti Infratel and its tenancies as there was a possibility of rationalization of mobile sites by the merged entity.
However, with the merger announcement, the risk of rationalization has been capped at 20 percent of total sites and no more. CLSA earlier this month had come up with a report stating that the concerns were overdone for Bharti Infratel and that the risk-reward was favourable.
At that time the Bharti Infratel’s stock price was at Rs 290/share. CLSA believes that the tenancy hit is likely only after FY19 and valuation suggests the stock is now pricing in a pessimistic scenario on growth. Infratel will add 16,000 tenancies annually as there will still be three large operators in India mobile.
Analysts also believe that the recently announced Vodafone-Idea merger could also pave the way for Infratel to acquire towers owned by Idea and Vodafone and also add to its 42 percent stake in Indus Towers, which would be positive catalysts for its growth and valuation.
The Street is estimating site rationalisation only in FY19 and when this happens it could lead to a loss of 14000 tenancies for Indus and 4000 tenancies for Infratel. Another merger that can have an impact on overlaps in towers is the Bharti Telenor deal which can possibly result in 40 percent of Telenor’s sites getting decommissioned. This could result in loss of 5,000 tenancies for Indus and 1,000 tenancies for Infratel.
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