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    Airtel’s Africa business valued at $6.6 billion

    Synopsis

    Bharti Airtel had recently showcased its Africa business and strategies to further turn around the asset during an analyst meet in Uganda

    ET Bureau
    KOLKATA: Bharti Airtel’s Africa business is being valued at $6.6 billion even as the Sunil Mittal-led telco’s international holding company for Africa operations explores an initial public offer (IPO) to dilute a minority stake, analysts said.

    Bharti Airtel, they said, is likely to list its Netherlands-based subsidiary in a broad international exchange such as Nasdaq, Luxembourg Stock Exchange, Euronext Amsterdam or the London Stock Exchange by zeroing in on a neutral country where capital markets and banking systems are well established and financial regulations are not archaic.

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    Bank of America-Merrill Lynch values “Bharti’s Africa business at six times Ebitda (read: operating income), leading to an estimated enterprise valuation of $6.6 billion by FY19”. The US brokerage pegs Bharti Africa’s equity valuation at $1.1 billion after factoring in an estimated $5.5 billion net debt.

    Bharti Airtel had said on Wednesday that the board of directors of its wholly owned arm Bharti Airtel International (Netherlands) BV (BAIN BV) had authorised its management to initiate non-binding exploratory talks with banks/intermediaries to evaluate the possibility of listing its shares on an internationally recognised stock exchange.

    BAIN BV is also the global holding company of Bharti’s telecom operations in 14 African markets. The US brokerage, however, expects “Bharti to remain the majority shareholder in Africa even after a potential listing” as it would lead to consolidation of the Africa business in the company's Indian numbers.

    Bharti did not offer comment to ET’s queries on the valuation of its Africa business, its preferred international bourse for listing BAIN BV or the possible extent of stake dilution.

    Bharti Airtel had recently showcased its Africa business and strategies to further turn around the asset during an analyst meet in Uganda. Airtel has been performing well in Africa, having reported a $76 million profit in the December quarter, compared with a loss of $93 million a year earlier, helped by a surge in data traffic and Airtel Money transactions.

    Brokerage BNP Paribas said Bharti’s plans to separately list Airtel Africa made strategic sense as it would “provide visibility on its valuation and could also help Airtel deleverage its balance sheet”.

    Bharti Airtel shares dipped 1.15% to close at Rs 429.20 on BSE on Wednesday.
    Bharti Airtel shares dipped 1.15% to close at Rs 429.20 on BSE on Wednesday.
    Analysts, however, said that post listing of the Africa business, Bharti Airtel could adopt a similar strategy that it has for its listed tower unit, Bharti Infratel, in that it could progressively cut its stake in the Africa business and invest the proceeds in the core India mobile business, which has significant growth potential but would require high network investments in the short term to counter Jio and Vodafone-Idea.

    Brokerage PhillipCapital said listing the Africa operations would provide Bharti with “significant ammunition” to fight price wars in India. Bharti’s ability to monetise its Africa operations, it said, would not only provide a big war chest, but also send a signal to competition about its ability to sustain low tariffs for longer periods.

    “Bharti is already looking at selling Bharti Infratel, and might do the same for its Africa operations, clearly showing its huge stack to its Indian competitors and its willingness to go all-in for its India wireless operations,” PhillipCapital said in a note seen by ET.

    Bharti Airtel has been raising funds by progressively reducing its stake in Bharti Infratel to cut debt and free up cash and gird up for competition from Jio.


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