The Qatar Foundation Endowment (QFE) has bought a 5% stake in India’s Bharti Airtel for the sum of $1.26 billion, helping the operator to reduce debts and fund the expansion of network activities in Africa.
The price paid implies the Indian operator is worth $25.2 billion in total, about 7% more than a valuation based on its share price last Friday, before the transaction was announced.
According to the UK’s Financial Times newspaper, citing people familiar with the matter, Bharti (New Delhi, India) is likely to use the investment to reduce its net debt of $11.8 billion and finance growth in Africa.
In 2010, the operator paid $10.2 billion to Zain (Kuwait City, Kuwait) to acquire telecoms businesses in 17 African countries.
The deal has represented something of a financial burden for Bharti, which has also faced a slowdown and a number of regulatory challenges in its domestic market.
In its recent quarterly report, the operator said that net income fell to INR5.1 billion ($94.2 million) from INR10.1 billion in the same part of 2012, even though revenues grew by 9%, to INR204.5 billion, over the same period.
In Africa – where total revenues grew by 5%, to $1.12 billion, but earnings before interest, tax, depreciation and amortization slipped by 4%, to $285m – Bharti says it is “focused on 3G through rollout of new sites across markets to increase the user base”.
Last quarter, the operator spent 21% of its Africa revenues on capital expenditure in the region, compared with a figure of 17% for the Bharti business as a whole.
According to the Financial Times, Manoj Kohli, the head of Bharti’s international business, said the operator would also continue to buy out minority shareholders in African operations it does not fully own.
The operator had already signaled its desire to strengthen its African operations with the announcement in late April that it had fully acquired Warid Uganda (Kampala, Uganda) from Warid Group (Abu Dhabi, United Arab Emirates) – a move that will see it acquire another 2.8 million Ugandan customers to give it 7.4 million in total.
The purchase by sovereign-backed QFE is the latest example of the Middle Eastern country’s investment drive, which has seen the energy-rich Gulf state acquire stakes in a range of international businesses.
“As a long-term global investor, our shareholding gives us exposure to a high-growth sector in emerging markets,” said Rashid Al-Naimi, the acting chief executive of QFE. “QFE looks forward to supporting Bharti in realizing the full potential of this world-class business.”