BHARTI Airtel, the country’s largest mobile phone operator, has said that the acquisition of Bangladesh’s Warid Telecom was the ‘start of its international journey of taking the company to be global player’.
Bharti Airtel’s CEO Manoj Kohli said, the Indian telco would pay $300 million for a 70% stake in Warid Telecom but this fund would be used to expand the Bangladeshi telco’s network across the country. Warid is Bangladesh’s fourthlargest operator with just under 3 million customers and the Indian operator will be using its internal accruals to fund the deal.
The Sunil Mittal-promoted company, which already has operations in Sri Lanka, is pressing ahead with its international ambitions just three months after it failed in its second attempt to merge with South Africa’s MTN. An alliance with MTN would have made the combine the fourth largest operator globally. For Bharti, expanding abroad is vital since urban India is close to reaching saturation as teledensity in cities, towns and metros has crossed 100% and revenues and profits of all Indian telcos are under severe pressure as they engage in a savage price war.
Following the failure of the MTN deal, Bharti has been linked to several operators, including Kuwait’s Zain and Egypt’s Orascom, as both these operators have significant presence in markets across Africa and Asia. Asked if the Warid deal signals Bharti’s intention to expand overseas through smaller buys across Asia and Africa, Mr Kohli said the telco was interested in acquisitions in emerging markets: “They may involve big, medium of small companies, but our focus will be on emerging markets,” he added.
Explaining the logic behind the Warid move the Airtel CEO pointed out that Bangladesh with just 33% mobile penetration was among the largest markets globally in terms of growth potential. Analysts say the number of cellphone users is Bangladesh will double to 100 million by 2013. But he did not comment on Bharti’s plans to clean up Warid’s books nor the debt that the telco currently has.
Bharti Airtel will purchase existing shares from the Adu Dhabi Group, the West Asian owners of Warid, and also subscribe to fresh shares issued by the Bangladesh firm. The Dhabi Group will continue to hold the remaining 30% in Warid. Industry executives tracking the deal said Bharti’s buyout of Warid may also result in a merger or strategic alliance with another telecom operator there called Bangladesh Telecom. This is because Bharti’s largest shareholder SingTel holds a significant stake in Bangladesh Telecom. But, Mr Kohli ruled out a merger and said that both Warid and Bangladesh Telecom would explore the possibility of sharing their mobile networks.
Mr Kohli said the Airtel brand which is set to launched in Bangladesh would be well received ‘especially since the telco’s brand ambassadors— Shahrukh Khan & AR Rahman—were popular in that country. Bharti executives also added that its existing partners which include IBM, Ericsson, Huawei and Nokia Siemens amongst others may bag contracts for Warid. “Normally, our strategy is to take our partners along with us, but we have not finalised anything yet,” Mr Kohli added.
The deal also makes Bharti the first Indian telco to make in-roads into the Bangladesh mobile market, where several foreign players already have operations. In 2004, Egypt’s Orascom bought out Bangladesh’s Sheba. A year later, Singapore’s Singtel bought 45% in Bangladesh Telecom and in 2009 Japan’s NTT DoCo-Mo paid $350 million for a minority stake (30%) in AKTEL, owned by Malaysia’s Axiata. The Bharti Airtel CEO also denied media reports that Bharti would invest $1 billion in Warid, but clarified that the total investments in Warid would be over a billion soon. “So far, the Dhabi Group has invested close to $680 million in Warid and will put in another $300 million. The total investment in the company will, therefore, cross $1 billion mark soon,” he added.
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