Singtel cuts stake in Bharti Airtel to fund 5G, business growth

Singtel is to sell off 3.3% of its stake in India's Bharti Airtel Ltd, which it expects will raise approximately 2.25 billion Singapore dollars (US$1.62 billion).

The company said Thursday it would use the funds for 5G investment and business expansion.

It described the sale as part of its "capital recycling strategy" to optimize its telecom investments, but it is also a part of a strategic reset.

Figure 1: The sale will realize an estimated S$600 million ($431 million) net gain for Singtel.
(Source: tofino/Alamy Stock Photo)

In its telecom portfolio this year, it has tipped another S$330 million ($237 million) into Intouch, the parent of Thai operator AIS, and raised S$160 million ($115 million) from partial divestment of Airtel Africa.

It is also trimming non-core businesses, selling off unprofitable digital advertising arm Amobee for $239 million and reviewing its under-performing cybersecurity business Trustwave ahead of a possible sale.

CFO Arthur Lang said the value of Singtel's stakes in regional telcos had risen substantially but had not been properly reflected in the share price. The reduction of the Airtel stake – Singtel's first since its initial investment in 2000 – was aimed at highlighting the "sizeable value" of its holdings in the Indian telco.

"With this transaction, we will raise over S$2 billion ($1.4 billion) which will help to fully meet the group's needs for 5G and growth initiatives in the next few years," Lang said.

The sale to Airtel Telecom Ltd, a JV between Singtel and Bharti Airtel, will realize an estimated S$600 million ($431 million) net gain for Singtel.

Upon completion of the sale, Singtel will own an effective stake in Bharti Airtel of 29.7%, worth S$22 billion ($15.8 billion), comprising a 10.5% direct stake and a 19.2% indirect stake through Bharti Telecom.

'Committed long-term investors'

Lang said Singtel remained "committed long-term investors" in Airtel, pointing out that the company had invested S$1.3 billion ($934 million) in the Indian operator over the last three years.

Bharti Airtel is the biggest in Singtel's portfolio of mobile operators, which also includes Indonesia's Telkomsel, Optus in Australia, AIS in Thailand, Globe Telecom in the Philippines and Airtel Africa, which operates in 14 African countries.

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On Wednesday, Singtel announced underlying net earnings of S$499 million ($358.6 million) for Q2, up 11.7% over last year. Operating revenue was 1.8% higher at S$3.58 billion ($2.57 billion).

Singtel's stock closed 1.9% higher Thursday.

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— Robert Clark, contributing editor, special to Light Reading