With the recent upheavals in the telecom industry, another major telecom company comes into the limelight following a sale of shares. Airtel’s wholly owned subsidiary Nettle Infrastructure Investments Ltd. are in plans to buy a 32% stake in Bharti Infratel by 18 March 2019. The majority shareholder of Bharti Infratel Ltd., Bharti Airtel Ltd. is going to reduce its stake in the company by more than a half. Airtel will end up owning an 18.3% stake from its current stake of 50.33% after the deal is completed.
This move has taken place because of the soaring debts in the industry as a whole. Along with rapidly falling profit margins. With Jio entering, the whole industry has been thrown into a chaotic mess. Where there has been cut-throat competition and companies bleeding them out to give heavy discounts.
Details of the transfer:
Nettle Ltd is going to buy shares at a price of Rs. 362.45 per share. Which was decided upon by adding a premium to the closing price of the stock on 11 March 2019. This purchase is going to add on to the 3.18% share that Nettle already owns in Infratel. Post the transfer of shares, Nettle infra investment’s holding in Bharti Infratel will increase to 35.18% from 3.18%.
Furthermore, Other major companies like Singapore Telecommunication Ltd. is also looking to buy a share in the Indian telecom giant. Singapore Telecommunication Ltd. is looking to buy shares and bonds worth $525 Million in Airtel. This is being done as per Airtel’s plan of raising a total of $4.6 Billion, through such sales. The money will be used to fight off Reliance Jio and to bolster its country wide 4G network. It will also be used to regain its position as the largest service provider in the Indian telecom market. Which has been recently taken by Vodafone-Idea after their merger.
PREPARING TO FIGHT OFF COMPETITION
These moves are for creating a buffer stock for battling and outlasting Reliance Jio in the market. Recently, Jio has been capturing and carving its path in the market share. It has been steadily acquiring an increasing number of customers base. Since the advent of Jio, Airtel has been in damage-control mode. It has been accumulating funds, cutting its debt and increasing its liquidity. The company has created a special committee of directors to ‘comprehensively evaluate various fundraising options to strengthen the company’s capital structure. Also their balance sheet according to their exchange filing. Such decisions have been benefiting them and they have been successful in freeing up some funds for themselves and meet their flagship 4G expansion plans expenditure needs.
Other Measures taken:
In addition to the domestic competition and expansion plans, Bharti Airtel has been making inroads in Africa as well. The company’s Africa arm has been generating revenue and is also supposed to launch its IPO sometime this year.
Vodafone-Idea is the current market leaders in terms of revenue market share (RMS). By Q4FY19, both Jio and Airtel are expected to leave the company behind by virtue of their superior 4G networks. Vodafone-Idea is cognizant of the threat these two companies pose and has been preparing its funds as well. Further, the company has been looking to sell off its equity and fiber assets so as to battle along with other two.
Meanwhile, In this fight between these players, the consumer has been the biggest winner. Data prices in India have fallen to an unprecedented low and now rank among the lowest in the whole world. This competition although looks to be very beneficial but soon a company is going to come out on the top capturing market share from the others. That is not going to be as pleasant a sight.