NEW DELHI: BhartiAirtel, India's largest mobile phone company by subscriber numbers and revenues, plans to sell minority stakes in its landline and enterprise businesses as part of an exercise to cut debt, two executives with direct knowledge of the development said.
The company is learnt to be looking at an enterprise valuation of about Rs 17,000 crore for its fixedline unit and about Rs 6,500 crore for its enterprise business.
The Sunil Mittal-promoted telco has already sounded out potential investors, but is yet to sign non-disclosure agreements with either strategic or PE investors, one of the executives quoted above said. The exact quantum of the stake sale has not been decided yet, but it will be less than 50%, this executive added. The executive said the stake sale in the fixedline business will happen first and the enterprise unit much later, maybe after 12-18 months.
The Bharti spokesperson said the company will not comment on selling stake in its fixedline business, but has no plans to offload stake in the enterprise arm.
Bharti, the world's fourth-largest mobile phone company in terms of customers, will offload stakes in these two businesses only after it completes the sale of a 25% stake in its DTH arm. It is in talks with several private equityfunds to sell up to 25% in its DTH venture for about $250 million.
One of the executives quoted above said Bharti's recent decision to terminate its JV withAlcatel-Lucent for managing its fibre optic cable, fixedline and broadband business was on account of its plans to have 100% control of this business before selling a minority stake.
One option being considered is to invite rival mobile phone firms Vodafone and Idea to create a consolidated entity.
INDUS-LIKE ENTITY BEING PLANNED
The merged entity will combine and manage the landline and cable businesses of all three companies on the lines of Indus Towers, the world's largest tower company, and thenmonetise this entity, the executive added.
Last month, Bharti AirtelBSE -1.23 % had entered into a deal to sell a 5% stake to Doha-based Qatar Foundation for Rs 6,796 crore in order to bolster finances that are weighed down by a debt of $11.7 billion (Rs 63,839 crore). Executives linked to Bharti said the company is looking to monetise some of its assets to deleverage its balance sheet as this would give it headroom to pick up more funds from the market. The telco had raised $1.5 billion (Rs 8,094 crore) through bonds in the March quarter to reduce debt.
Bharti's enterprise arm, which is a B2B business vertical and provides connectivity and a range of other communication services to corporates, is its second-largest business division after mobile services, with revenues of Rs 5,320 crore in the year ended March 2013, accounting for close to 10% of the telco's total sales across India, South-East Asia and Africa.
This business segment had earnings before interest depreciation and tax (EBIDTA) of Rs 936 crore last fiscal. Sales grew 19% and EBITDA 13% in the fiscal, as per information available on the Bharti website.
The landline arm, which is among its most profitable with margins of 42.5%, had revenues of Rs 3,816 crore and EBIDTA ofRs 1,630 crore in the last fiscal. But revenue and EBIDTA growth for this segment has been more or less flat over the last two years.
In February, Bharti had announced it would buy out Alcatel-Lucent's majority stake in the JV that manages its fixedline and broadband business without disclosing financial details. The two partners had set up a 26:74 joint venture in 2009, and Bharti had said it would pay this entity about $500 million (Rs 2,650 crore) over a five-year period for managing its landline and broadband business in about 100 cities. This contract ends in 2014.
The company faces payouts to the tune of several thousands crores in regulatory fees and spectrum charges in its primacy market, India. Further, it must also shell out billions of dollars to renew its mobile permits from next year onwards.
Over the last 12 months, Bharti has undertaken a slew of initiatives to raise funds against the backdrop of slowing growth in the sector, made worse by regulatory uncertainty and legal troubles. In addition to the recent stake sale to Qatar Foundation and the $1.5-billion bond issue, Bharti listed its tower subsidiary, Bharti Infratel, a couple of months ago while the parent company has also exited several businesses, including selling majority stake in its value-added services company Comviva Technologies.
Earlier this month, Bharti had announced that its quarterly profit declined 50%, its 13th consecutive fall, primarily due to increased losses in its African operations, which it acquired from Kuwait's Zain in a $9-billion debt-funded deal in 2010. Losses in the continent widened 42.5% to Rs 486 crore for the quarter ended March 2013 while the company failed to meet its target of 100 million customers, $5 billion in revenues and $2 billion in core earnings, or EBIDTA, for the year to March-end 2013.