Financial Daily from THE HINDU group of publications
Saturday, Oct 29, 2005
Info-Tech - Mergers & Acquisitions
Vodafone buys 10% stake in Bharti Tele for Rs 6,700 crore SingTel evinces interest to hike stake
TYING UP WITH `BEST IN CLASS': Mr Arun Sarin (left), Chief Executive Officer, Vodafone Plc, with Mr Sunil Mittal, Chairman & Group MD, Bharti Tele-Ventures, at a press conference in the Capital on Friday. - Kamal Narang
New Delhi , Oct. 28
THE world's largest telecom player Vodafone today made its re-entry into the Indian mobile market by picking up a 10 per cent equity stake in the country's largest private sector telecom operator Bharti Tele-Ventures (BTVL) for Rs 6,700 crore (approx $1.5 billion).
This is the largest foreign investment in the telecom sector and comes within days of the Government's decision to relax the FDI limit in telecom companies to 74 per cent.
Bharti's existing foreign partner SingTel, which has 30.8 per cent stake in BTVL, said it was interested in increasing its share in the company.
Vodafone had earlier sold out its stake in the Chennai-based mobile company Aircel to exit India.
Long-term investment: Today's move is being seen as a long-term strategic investment from the UK-based company to gain a foothold in the fastest growing telecom market in the world. Though the investment will not result in any direct flow of funds into Bharti's telecom operations, the partnership with Vodafone will provide the company necessary know-how to roll out third generation services at an early date.
Bharti, currently, has 15 million subscribers across the country.
The deal: As per the deal announced today, Vodafone, through Vodafone Mauritius Ltd, has contracted to subscribe shares in Sunil Mittal-promoted Bharti Enterprises, giving it a beneficial stake of 4.4 per cent in Bharti Tele-Ventures for about Rs 3,000 crore.
In addition, Vodafone, through Vodafone International Holdings BV, has also picked up 5.65 per cent stake of Warburg Pincus' stake in BTVL for approximately Rs 3,700 crore, thereby taking the total beneficial interest in the company to around 10 per cent.
Bharti retains controlling interest: Post-acquisition, Bharti Enterprises maintains a controlling interest of 45.9 per cent in the BTVL through its subsidiary Bharti Telecom Ltd. With the final sale of its stake, Warburg Pincus, which had bought 18 per cent stake in BTVL initially for about Rs 1,300 crore, has now completely exited its position in the company.
The private investment company had earlier sold 12 per cent stake in three tranches for close to Rs 4,600 crore, making it one of its best returns on investment. Vodafone is the fifth telecom major to invest in Bharti after Vivendi, British Telecom, Telecom Italia and SingTel.
`Vodafone helped by clarity on FDI': Mr Arun Sarin, CEO, Vodafone Group Plc, said, "The Indian Government's decision to bring more clarity in the FDI norms has certainly enabled us to make a decision on making this investment. This transaction is consistent with Vodafone's strategy of developing our global footprint in growth markets. We have investments in 30 countries and we are delighted to partner the leading national mobile operator in India."
Post-acquisition, FDI in Bharti stands at 48 per cent and with indirect foreign investments, it will add up to 67 per cent.
`Bharti will move to next level': Mr Sunil Bharti Mittal, Chairman and Group Managing Director, Bharti Group said: "We are delighted that Vodafone has made a call on the Indian telecom sector and has chosen BTVL to be the vehicle to develop its continued interest in the Asian region.
"Bharti has had the privilege of tying up with `best in class' blue chip companies from around the world that have come and joined hands with Bharti, at different stages, to develop the telecom sector in India.
"Bharti has tied up with Vodafone to take the company to the next level."
Mr Mittal added that the proceeds from the sale of equity would be utilised in new business areas of the Bharti Group.
Sarin calls on PM: Earlier during the day, Mr Arun Sarin called on the Prime Minister, Dr Manmohan Singh, and apprised him of the company's plans for the Indian telecom sector.
Vodafone also announced a grant of $12 million to Bharti Foundation for the growth of primary education throughout the country.
The money will be spent on providing facilities of primary education at all the 23 circles of Bharti Televentures.
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