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Bharti sells 5% stake to Qatari backer

Raises $1.26bn to reduce debt burden and finance expansion in Africa, seen as core to future growth


Published: 3 May, 2013

READ MORE: M&A | Africa & Middle East | India | Bharti Airtel

India's Bharti Airtel, the world's fourth largest operator by subscriber numbers, has sold a 5% stake to the Qatar Foundation Endowment (QFE) for INR68bn ($1.26bn). The deal reflects the growing power of Gulf-region investors in global telecoms, as well as Bharti's need to raise capital to expand its investment in new markets.

With its home base under intense price and regulatory pressure, Bharti has been pursuing expansion in high growth emerging markets, mainly in Africa, where it bought the sub-Saharan activities of Zain. It wants to make further investments in expanding those units, and buying new ones.

The new injection values the Indian company, which is controlled by billionaire Sunil Mittal, at $25.2bn, and the offer represents a 7% premium to the group's share price on Friday morning. While Qatari organizations have been involved in many high profile deals in various industries recently, this is the first major public investment by QFE, which was established to fund the activities of the Qatar Foundation, a prominent investment vehicle and a cultural organization run by the oil state's royal family.

Though seen as strategically vital, the $10.2bn Bharti/Zain deal of 2010 has put considerable strain on the Indian giant's finances and this week, it announced disappointing 2012 results, including increased losses in the 17-nation African division. Bharti also operates in Bangladesh and Sri Lanka. In April it acquired Warid Telecom Uganda, and this week it bought the 30% it did not already own in Warid Telecom in Bangladesh. This prompted speculation that further deals with the Abu Dhabi-based Warid might ensue.

The Qatari agreement will help Bharti reduce its net debt mountain of INR638bn ($11.8bn), while also financing further expansion in Africa. Speaking after the company's results announcement, Manoj Kohli, head of Bharti's international business, said the company still aimed to buy out the minority shareholders in African units where it did not have full control.

In a statement Bharti said the QFE deal would "further strengthen the capital structure and provide further flexibility for the company to deliver on its growth strategy".

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