the other side of the Airtel story


After a long and fruitless hunt for acquisitions, Singapore Telecommunications is in sight of a growth booster. And going by its involvement in the Bharti Airtel-MTN Group merger talks, it is determined to grab it.

SingTel’s current business model depends on its foreign holdings, including Indian associate Bharti Airtel, to generate profit growth, with operations in Australia and Singapore yielding cashflow. But some of its foreign mobile associates are under pressure from increasing market competition while others are posting losses.

Bloomberg News/Landov

A Bharti-MTN merger would be a godsend for SingTel.A combination of Bharti and MTN would thus be a godsend for the Singapore company — Tuesday SingTel said it will “continue to be actively involved in due diligence and key aspects of the transaction,” emphasizing its interest.

If the $23-billion merger deal goes through, SingTel could own a piece of an outfit that would have more than 200 million subscribers in Asia, the Middle East and Africa combined, generating more than $20 billion in annual revenue. That’s almost twice SingTel’s revenue during the fiscal year that ended March.

Although the deal could dilute SingTel’s holding in Bharti to 19%-20% from the current 30.4%, SingTel could get as much 12% of MTN.

zyakaira’s update on the deal: Singtel is financing the sale as per its stake and additionally, planning to buy back the 10% odd that is being diluted from MTN as MTN looks for more cash from the deal. MTN is definitely the more profitable partner in a hyper growth market where India’s growth and that of Airtel is currently sluggish comparitively and EBITDA also compares favorably for MTN. Airtel’s expertise and hold on the sector is significant of course, and the requirement of good management may weigh over the ‘zyaada’ desire of MTN to exercise cash and control from the deal. Also, both parties would be having a harrowing time trying to handle the pursuant tax implications

On the telecom front the other ‘investment’ news to watch out for is the funding of the JV stakes in new circles and the 5000 crores reserve price worth auctions of 3G and WiMax spectrum. One feels they could easily have been combined instead of two different reserve prices as buyers are the same. Airtel in any case, would be one of the more forthcoming bidders and one of the first to roll out.

via Bharti-MTN a Dream Deal for SingTel –