Singtel sells US$1.6 billion Bharti stake to fund 5G

Singtel has inked a S$2.25 billion (US$1.6 billion) deal to offload a 3.3 percent direct stake in Bharti Airtel as part of its broader asset monetisation push.

The Singaporean telco, which has been reshaping its business for the past couple of years, will actually bring in around S$0.6 billion (US$430 million) from the deal, because it is selling the shares to Bharti Telecom, a joint venture between itself and Bharti Enterprises. Nonetheless, the cash will be a valuable contributor to Singtel’s 5G rollout…and to keeping shareholders happy.

“As long-term strategic investors and partners, the value of our stakes in our regional associates has risen substantially over the years but has not been properly reflected in our share price,” said Singtel’s group CFO Arthur Lang. The stake sale will help to address that gap “by illuminating the sizeable value of our holdings in Airtel,” he said.

“With this transaction, we will raise over S$2 billion which will help to fully meet the Group’s needs for 5G and growth initiatives in the next few years, and put us in a strong position to grow our dividends in a sustainable way in line with our dividend policy,” Lang added.

On completion of the transaction, Singtel will hold a 29.7% stake in Bharti Airtel, which it values at S$22 billion (US$16 billion). It’s holding will be made up of a 19.2 percent indirect stake through Bharti Telecom and a 10.5 percent direct stake.

Singtel first bought into Bharti Airtel in 2000 and has forged a strong partnership with the Indian operator. It is understandable that it would now look to cash in on the growth potential it acquired so long ago. Indeed, this share sale may well not be its last.

In a statement issued to the Indian bourse, Bharti Telecom noted that “Bharti and Singtel have decided to make some directional shifts in their respective holdings in Airtel.” As well as outlining this first transaction, the company noted that, “Bharti and Singtel have agreed to work towards equalising their stake in Airtel over a period of time.”

Given Singtel’s well-publicised asset reshaping endeavours and the fact that Bharti’s direct stake in Airtel stands at around the 6 percent mark, it’s pretty clear which way any equalising would go.

Bharti Telecom said it will “calibrate and spread such acquisitions to maintain a comfortable level of leverage,” which perhaps suggests we shouldn’t expect another deal to be announced imminently though.

But in the meantime, Singtel has plenty of M&A deals to keep it occupied. The Bharti deal comes just days after the latest rumours emerged over its plans for cybersecurity business Trustwave – it could raise US$300 million, according to Bloomberg sources – and weeks after it announced the US$239 million sale of US-based digital media and advertising subsidiary Amobee. There was also the big Australian towers sale earlier this year.

But just to be clear, there is no indication that Singtel will look to fully cash in on its Indian investment. Quite the opposite, in fact.

Its finance chief highlighted the fact that Bharti Airtel had mobile operations serving just 300,000 customers when Singtel made its first investment, but has since grown to become one of the world’s biggest mobile players. Indeed, the Telecom Regulatory Authority of India’s (TRAI’s) latest figures show that it had a mobile customer base of close to 363 million at the end of June, and that doesn’t include its customers in South Asia and Africa. According to Singtel, Airtel has 491 million customers across 17 countries.

“With a more sustainable market structure after industry reforms and exciting new growth opportunities emerging from the government’s Digital India vision, we expect Airtel to become a significant contributor to Singtel,” Lang said. We remain committed long-term investors having invested approximately S$1.3 billion in Airtel over the last three years,” he added.

It’s clear that Singtel is cashing in, but not cashing out.