Singapore: Singapore Telecommunications (SingTel) may help with the funding for Bharti Airtel’s $9 billion acquisition of Zain’s African assets, a senior SingTel executive said on Friday.
SingTel, Southeast Asia’s largest telecoms firm that owns 32% of Bharti, said the acquisition would be financed by debt, and there was no need to inject money directly into its Indian affiliate since the deal would not dilute its stake.
“In one way or the other we will be part of the funding, we are a very substantial shareholder of Bharti,” SingTel’s CEO International Lim Chuan Poh told Reuters in an interview.
Bharti and Zain are in exclusive talks until 25 March for the Kuwaiti firm’s operations in 15 African countries and have agreed on an enterprise value of $10.7 billion for the assets, including $1.7 billion of debt on Zain Africa books.
Bharti’s bid is in line with the ambitions of SingTel, which is sitting on over $1 billion in cash and wants to enter the fast-growing African market to offset its presence in more saturated telecoms markets such as Singapore and Australia.
But the market value of Bharti, the leading Indian mobile operator, has plunged since it confirmed the deal on concerns that possible high debt for funding the transaction could stretch its balance sheet.
“It will definitely be through debt for the amount that we are talking about,” said Lim, a former Singapore government bureaucrat who joined SingTel in 1998.
SingTel, 54% owned by Singapore state investor Temasek, has spent S$18 billion in recent years to buy stakes in fast growing telecoms markets such as India and Indonesia.
The company has previously said it is also interested in Vietnam, where it has no presence, but Lim said costs were now outweighing revenues in the mobile market there because of price competition among operators.
“The prospect has gone from very good to pretty dicey,” he said, adding it was still a country that interested SingTel given the growth outlook for providing broadband and data services.
Lim, just back from a trip from Vietnam, said he travelled so much for his job he avoided going overseas in his free time. Lim runs the firm’s international operations while Allen Lew heads SingTel’s domestic business, both reporting to Group CEO Chua Sock Koong.
Lim said the firm was not necessarily looking to buy further assets directly, if it felt its associate firms could execute deals and operate in target countries more effectively.
“We are not egotistical about it. We have to be pragmatic...We do not believe in competing with affiliates.”
Lim said divesting assets was also a possibility, but not for its core business. He declined to comment on the possibility of an IPO for its fully-owned Australia unit Optus, and said this was a core asset that had been doing well.
“One potential consideration would be Bangladesh. We are not divesting to exit, we are divesting to consolidate,” he said, adding the company is open to divesting its Bangladesh holdings if Bharti approached it with an offer.
In January, Bharti agreed to acquire 70% of Bangladesh’s Warid Telecom, while SingTel already has a 45% stake in Pacific Bangladesh Telecom.
SingTel’s shares traded flat by 0756 GMT. The stock, the biggest by market cap in Singapore, has risen 1.6% so far this year, outperforming the 0.5% dip in the broader Singapore index.