SingTel – BT

SingTel expected to top up Bharti stake if dilution occurs

SINGAPORE Telecommunications’ stake in Bharti Airtel could be slashed by up to 10 percentage points or more if the latter’s merger with the MTN Group comes through but industry observers say the Singapore operator might be willing to pump in more money to make up for the dilution.

According to a Financial Times report citing unnamed sources, SingTel can be expected to acquire some, or all, of the 11 per cent Bharti shareholding expected to be offloaded by MTN shareholders who do not want to end up with Bharti shares after the planned deal.

If ongoing negotiations between Bharti and MTN bear fruit, the Indian operator will own a 49 per cent stake in its South African counterpart under a complex share-and-cash swap transaction valued at nearly US$23 billion.

Bharti last week offered to pay 86 South African rand and 0.5 newly issued Bharti global depository receipts for each MTN share. In return, MTN will lay claim to 25 per cent of Bharti while its shareholders will own another 11 per cent.

Market analysts said a successful Bharti-MTN merger is likely to reduce SingTel’s 30.5 per cent stake in its Indian associate to around 19 per cent, although Singapore’s largest operator will gain from having indirect access to Africa’s burgeoning telecommunications markets.

If SingTel acquires the 11 per cent Bharti shareholding from MTN shareholders after the deal, the move would restore its Bharti stake back to pre-merger levels. However, industry watchers say SingTel may have to raise more capital to fund this purchase.

When contacted, SingTel said it does not comment on market speculation. ‘Discussions between Bharti and MTN are ongoing, and SingTel will continue to be actively involved in due diligence and key aspects of the transaction,’ a company spokesman said.

However, SingTel’s recent track record would suggest it is always ready to seize opportunities for increasing its overseas stakes.

In March this year, the firm pumped in an additional US$25 million into Pacific Bangladesh Telecom Limited to take its total investment in the associate to US$143 million. SingTel also injected an additional US$75 million into its Pakistani associate Warid Telecom in January.

BT understands that Goldman Sachs is advising SingTel on the Bharti-MTN deal. Deutsche Bank and Bank of America Merrill Lynch are counselling MTN, while Standard Chartered is the financial adviser for Bharti.

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