Bharti Airtel Ltd., India’s largest mobile-phone operator, agreed to acquire a 70 percent stake in Warid Telecom in its first overseas acquisition.
Bharti, controlled by billionaire Sunil Mittal, will invest $300 million and take management control, the New Delhi-based company said in a statement today. Privately held Dhabi Group will retain a 30 percent stake, it said. The investment is the biggest by an Indian company in neighboring Bangladesh.
Bharti was India’s second-worst performing benchmark stock last year as competition from Vodafone Group Plc and NTT DoCoMo Inc. cut revenue and a $23 billion merger with South Africa’s MTN Group Ltd. collapsed. Dhaka-based Warid has 2.92 million subscribers, matching the number of users that Bharti adds in India in a single month.
“In the short term, it may not be earnings per share accretive as Bharti will have to make a lot of investment to expand Warid’s network as it’s a very small player,” said Deepti Chauhan at Asit C. Mehta Investment Intermediates Ltd., the top-ranked analyst tracking Bharti. “The acquisition has potential because of the low penetration in Bangladesh and high tariffs.”
Bharti fell 2 percent to 322.25 rupees in Mumbai, valuing the company at $27 billion. The stock declined 7.8 percent last year compared with an 81 percent gain in the benchmark Sensex.
One in Three
Less than one in three of Bangladesh’s 160 million people own a mobile phone, Bharti said. That compares with India’s 500 million subscribers, almost half the population.
Bharti Chairman Mittal’s failure in September, for the second time in as many years, to merge with Johannesburg-based MTN, Africa’s biggest wireless company, spurred the 52-year-old to seek opportunities nearer home. Bharti last January started operations in Sri Lanka, the island-nation off the southern tip of India.
“Bharti’s strategy is to focus on emerging markets,” Manoj Kohli, chief executive officer at Bharti, told reporters in New Delhi. “Bangladesh is a large underpenetrated market.”
Competition in India, the world’s second-largest wireless market after China, is intensifying as Tokyo-based DoCoMo and Fornebu, Norway-based’s Telenor ASA offer cheaper calls that include pay-per-second plans. India’s second-ranked mobile-phone operator Reliance Communications Ltd. is offering call rates as low as 1 U.S. cent a minute.
Warid is ranked fourth by subscribers in Bangladesh, which had 50.6 million users at the end of November, according to the Web site of the nation’s telecommunications regulator.
Telenor’s Grameenphone Ltd., with a market value of $3.84 billion, is Bangladesh’s biggest wireless operator with 22.8 million customers, followed by Orascom Telecom Bangladesh Ltd. with 13 million users and Axiata (Bangladesh) Ltd. that had 8.87 million. The country has six mobile phone operators.
Source: Business Week