Photo: Bloomberg

Photo: Bloomberg

Bharti pays Rs11.75 cr interim dividend to TCIL for fiscal 2012

Bharti pays Rs11.75 cr interim dividend to TCIL for fiscal 2012

New Delhi: In what is being seen as a short-term resolution to the issue, India’s largest telecom service provider Bharti Airtel Ltd has paid Telecommunications Consultants India Ltd (TCIL) an interim dividend of Rs11.75 crore for 2011-12.

Photo: Bloomberg

Bharti holds the balance 70%.

Hexacom is directly responsible for some 15 million subscribers, or about 9% of Bharti’s total subscriber base of 172.8 million at the end of October.

The dividend is at a rate of 15% for this fiscal year and will be updated once the consolidated earnings are finalized, a TCIL official said, declining to be identified.

A department of telecommunications (DoT) official confirmed the development, requesting anonymity.

Bharti Airtel declined to comment.

It was unclear if Bharti will pay the dividend every year, as TCIL had requested.

TCIL was looking at various options including selling its investment in Hexacom as the stakeholding was not making a difference to its balance sheet. Earlier this year, the TCIL board moved a proposal to DoT to divest its stake in Hexacom.

TCIL has been complaining for some years that despite Hexacom being profitable and debt-free, it was not giving dividends to shareholders.

Bharti had maintained that profits from Hexacom were being reinvested to expand operations and maintain market share in the highly competitive telecom sector.

One of the options gaining traction was of a share issue by Hexacom that would allow TCIL to get a fair idea of the value of its holding.

This, however, was ruled out as the TCIL board felt it would lead to a dilution in shareholding, to 24%, and weaken its voting rights in Hexacom.

DoT officials also believed an exit at the time would not get TCIL optimal value for its holdings as Hexacom was in growth mode and the valuation was bound to rise.

“TCIL would not have been able to enforce shareholder rights through a special resolution," the TCIL official quoted above said.

TCIL wanted Bharti to pay a 20% dividend for the previous fiscal year as well, but the private firm argued that this would require the books to be reopened, which was not feasible.

“Paying a dividend is always a negative as it means the telco, with an already weakish balance sheet, would have to pay some money from its books," a Mumbai-based analyst with a multinational investment bank said, also requesting anonymity.

The government invited bids for TCIL’s 30% stake in Hexacom last year, with a base price of Rs1,800 crore fixed by Deloitte Haskin and Sells.

But the sale process was put on hold in May as the cabinet secretary wanted the base price reviewed following complaints that it was too low as Hexacom had revenue of more than Rs1,700 crore and a profit exceeding Rs400 crore in 2010.

Bharti Hexacom was incorporated in 1995 and promoted by TCIL, Shyam Telecom Ltd Group and others.

In 2004, Bharti Airtel acquired a 68.5% stake in the firm.

Subsequently, Bharti acquired a further 1.11% equity from Kuwait-based Mobile Telecommunications Company in 2009, taking its shareholding in Hexacom to 70%.