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Holding co for Bharti Airtel’s Africa operations eyes IPO to unlock value

KOLKATA: Bharti Airtel’s Netherlands-based international hol..

KOLKATA: Bharti Airtel’s Netherlands-based international holding company for its Africa operations is exploring an initial public offer (IPO) in a move aimed at unlocking value of its African telecom assets amid a revival in the Sunil Mittal-led carrier’s business fortunes in the continent.

“The board of directors of Bharti Airtel International (Netherlands) BV (BAIN BV) on February 12, 2018, has authorised its management to initiate non-binding exploratory discussions with various banks/intermediaries to evaluate the possibility/feasibility of listing its shares on an internationally recognized stock exchange,” Bharti Airtel said in exchange filings to BSE and NSE on Wednesday.

Netherlands-based BAIN B.V. is a wholly-owned arm of Bharti Airtel and also the international holding company of Bharti’s telecom operations in 14 African markets — Nigeria, Chad, Congo Brazzaville, Democratic Republic of Congo, Gabon, Madagascar, Niger, Kenya, Malawi, Seychelles, Tanzania, Uganda, Zambia and Rwanda.

Bharti Airtel shares rose nearly 2.4% to close at Rs 434.20 on the BSE on Wednesday. Bharti Airtel, however, said the discussions around the feasibility of listing BAIN’s shares in an overseas bourse are at “an exploratory/preliminary stage”.

Though the Africa operations have historically been a drag on Bharti Airtel over the past 3-4 years, the Sunil Mittal-led telco has lately 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. Airtel’s Africa revenues too have grown 5.3% on-year to $783 million in three months ended December. The company had also reported a $48 million profit in Africa in the fiscal second quarter.

Pankaj Agrawal, partner at telecom and media consultancy Capitel, said two primary reasons for considering a listing are unlocking value with better visibility of investors into Africa operations, and paving the way for easier entry, exit and stake sale for Bharti in Africa. He added that some of the funds raised "can even be used to increase market share gains in India", where Airtel is in the throes of a continuing price war with Reliance Jio.

Another sector expert said plans to globally list the Africa holding company could also be aimed “at extracting better value for the African telecom assets which, typically, tend to get marginalised by Indian bourses”.

An analyst at a leading global brokerage backed the view, saying a global listing would help Airtel garner the right true value of its profit-making African operations, which may not be the case in India “where African assets tend to get subsumed in the total value of the Airtel stock and may not reflect their true value”.

Interestingly, plans to list BAIN B.V. in an international bourse come at a stage when parent Bharti Airtel has seen its revenue and profits fall sharply, hit by a brutal price war at home since Reliance Jio’s entry in September 2016, which hasalso led to consolidation in the telecom market. The telecom industry, already plagued by fierce price competition and debt upwards of Rs 7 lakh-crore, recently had another poor quarter. Unlike Jio, which reported a strong ARPU (average revenue per user) of Rs154 in the quarter to December, Airtel’s fell to Rs 123, stung by the sharp cut in interconnect rates, which compounded pressure on its voice and data businesses amid continuing price wars.

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