Japanese investment giant SoftBank is in preliminary talks with telecom major Bharti Airtel for picking up a stake either directly or indirectly in its telecom business and related assets.
Sources say the talks are wide-ranging and could include taking a stake in Bharti Airtel directly or through the holding company. It could also take the shape of making possible investments in some of its other telecom infrastructure assets and services which Bharti is looking at monetising.
However, sources also point out that whether a transaction will happen is impossible to predict at this moment. SoftBank prefers investments in start-ups or during the pre-initial public offering (IPO) stage.
A Bharti spokesman declined to comment on the issue. A SoftBank spokesperson said ‘we never comment on speculation’.
SoftBank already has a close relation with the Mittals, the founders of Bharti, which includes joint ventures (JVs) for making investments in social media, gaming, e-commerce, and renewable power.
The Japanese investor was also one among the six marquee investors which took equity in Airtel Africa, from which the company raised $1.25 billion to reduce the group’s overall gearing and then went in for an IPO.
Apart from its telecom business, Bharti Airtel has demerged its fibre assets into a separate company through a slump sale; it has stakes in the tower business (Bharti Infratel and Indus Towers), which are going through a merger and a substantial submarine cable asset; it also runs direct-to-home services; and it has a fixed-line broadband business, which has started offering fibre-to-home services.
In many of these businesses, Bharti is looking at monetising its assets to reduce its debt, so that it can take on Reliance Jio in what is a bruising battle for customer acquisitions. This situation provides opportunities for global investors such as SoftBank.
Bharti Airtel has been able to reduce its debt by a fresh capital-raise from 4.4x net debt to earnings before interest, tax, depreciation, and amortisation to 3.3x. With the Airtel Africa IPO, this number will go down to only 3x.
SoftBank has recently announced that it is raising a technology investment fund of $108 billion following the success of its first Vision Fund, which has invested in many India companies such as Ola, OYO Hotels, and Flipkart.
It also invests directly in companies and some of these are then sold to the fund.
SoftBank has been an important player in telecom in Japan. Its relations with the Bharti Group go back several years. For instance, in 2011 Bharti Enterprises and SoftBank set up a 50:50 JV, Bharti SoftBank Holdings Pte, to invest in social media, gaming, and e-commerce.
The company has invested in Hike, India’s home-grown messaging app, which was founded by Kavin Bharti Mittal and is part of Bharti Enterprises. The venture has raised over $261 million from SoftBank, Tencent, and Tiger Global, among others.
Bharti Enterprises has taken a 20 per cent stake in another JV — SB Energy — which is investing in renewable energy in India. SoftBank and Foxconn are the other partners in the venture.
According to reports, SoftBank has also had some discussions with Jio to take a stake, which could also include its retail business. However, for this to happen, Jio needs to be spun off as a separate entity before it takes the move for an IPO.
Currently, Jio is concentrating on bringing investors into its fibre and tower companies, which have been spun off as separate entities as part of its effort to monetise assets and reduce debt.—Business Standard