Is Bharti Airtel’s 100% FDI approval a play for 5G services rollout?

  • Jan 23, 2020
  • The Financial Express

With Bharti Airtel getting the government approval to raise FDI in the company to 100 per cent, the question regarding potential fundraising and the use of any future investments is but natural. While Bharti Airtel is yet to pay up hefty AGR dues, as directed by the Supreme Court, India’s second-largest telecom company may put in any future money raised through foreign direct investments (FDIs) for implementing 5G network, further upping its game, an industry source told Financial Express Online. “The money may be used for reduction in debt as well as investments in network infrastructure. The investors will make a decision depending on the priority,” said the above-mentioned source. This gives the company leverage to further raise funds for future developments.

Bharti Airtel recently raised $3 billion through a qualified institutional placement (QIP) and an overseas bond which should help the company pay its dues. As far as the money raised from FDIs is concerned, it could be deployed for 5G in future, said Rohan Dhamija, Partner at research firm Analysys Mason. On 31 December, the government had initiated the process for deploying 5G in India. It had also met operators and vendors to analyse a broad road map for the trials expected to take place in the current quarter. The last date to submit applications for the trials was 15 January. The government is expected to assess the applications and further allocate the trial spectrum to its licensees, or telecom service providers.

Even if it were not to be speculated how Bharti Airtel would use funds, raising the money itself would be beneficial for Sunil Mittal-company, Narendra Solanki, Head Fundamental Research – AVP Equity Research at Anand Rathi, told Financial Express Online. It’s currently difficult to assess what strategy the company would like to adopt. However, any relief on the financial front would be seen as positive for the company as well as the market, Narendra Solanki said.

“New technological affiliations are the need of the hour and any investor with a high-risk appetite who wants to go in early within the country in terms of technology would look at investments in this sector,” said Narendra Solanki. While the competition in the Indian telecom sector is limited, investment in the top two companies for technology advancements would reap good returns in future.

Moreover, the approval for higher FPIs and FIIs will enhance prospects for the company and help its promoter, Singapore based Singtel to further increase its stake. Singtel had around 37 per cent stake in Bharti Airtel which may have slipped a bit after Airtel’s recent equity fundraise of $3 billion. Bharti Airtel can not only benefit from Singtel financially but also tap its expertise in next-generation technologies. The company is likely to roll our 5G network in Singapore.

Meanwhile, Bharti Airtel has sought a nod from the government for infusion of Rs 4,900 crore investment from Singtel and other foreign entities to clear its dues. The decision is still in process, according to sources. “Bharti Telecom Limited (Promoter of Bharti Airtel Limited), in order to retire some debt, may seek equity from its existing promoter group (which may include its overseas entities) and SingTel in proportionate to its holding,” Airtel had earlier said in a regulatory filing.

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