With increased competition and pricing pressure, all telecom players are in the race to raise capital to fuel growth and bring down debt.
India’s biggest mobile carrier, Bharti Airtel, isn’t far behind.
With its Africa business seeing steady signs of growth, Bharti Airtel is all set to encash on that.
CNBC-TV18 learns from sources that the management of the telecom giant has internally finalised a two pronged strategy to monetise its Africa business.
If the strategy works to Bharti Airtel’s vision, the company will be able to raise up to $2.5 billion by end of 2019.
Bharti Airtel’s Two Pronged Strategy
In the first part of the strategy, Bharti Airtel may look to raise capital from private equity investors.
“The company is in advanced talks to sell 10-15 percent in Bharti Airtel International, the holding company of its African business, to a consortium of private equity (PE) investors led by Warburg Pincus,” says a source close to the development.
“Bharti Airtel hopes to raise between $1 billion and $1.5 billion via the divestment of stake to PE investors,” he added.
The EBITDA (earnings before interest, taxes, depreciation, and amortisation) of the Africa business is currently at about $1.5 billion, at a 10x multiple, that is $15 billion.
So a $1-1.5 billion expectation from a 10-15 percent dilution is fair. Sources add that Bharti Airtel hopes to complete the sale early in the first half of CY19.
The sale to PE players would be a precursor to an eventual listing of its African business, which is the second part of its strategy. Once the sale is completed, Airtel will begin the process to list its African business.
“The company is hoping to begin the process of listing its African business by the second half of CY19. Based on the conversations so far, the company hopes to raise up to $1 billion from the IPO,” says another source familiar with the development.
The monetisation of its African business has been on the anvil for the company for a long time, but the company wanted to wait for the African business to see a turnaround before taking it to the next level.
While the capital raised will be deployed directly to bring down debt and expand infrastructure for its India business, the visibility that a listing will bring to its African business will be critical.
Parallely, sources also say that other modes of debt reduction are being looked at to strengthen the balance sheet. – CNBC Tv 18