Bharti Airtel, India’s largest telco, is to pay $300 million (€207m) for a 70% stake in Bangladesh operator Warid Telecom.
New Delhi-headquartered Bharti will buy shares from the Dhabi Group, which owns 100% of Warid, as well as subscribe to fresh equity in the company. Bharti will pump funds into Warid to expand its network and introduce new services.
“As a result of this additional investment, the overall investment in the company will be in the region of $1 billion,” Bharti said in a statement.
“Bangladesh, with a population of over 160 million and tele-density of 32% ,is a very promising market for telecom services,” said Bharti Airtel chairman and managing director Sunil Mittal. “In particular, we look to leverage our rich experience in taking mobile telephony into rural areas and expand our services to the deepest pockets of Bangladesh and double the tele-density in few years.”
As of November 2009, Warid, Bangladesh’s fourth-largest cellco, had 2.92 million subscribers and a market share of 5.9% in Bangladesh. Bharti has 116.01 million mobile customers.
Bharti’s international investment, the first by a domestic company in 2010 and the largest Indian investment into Bangladesh, follows two unsuccessful attempts to merge with South Africa’s MTN and slowing growth in its home market.
Faced with stiff price competition from newcomers desperate to gain market share, Bharti’s subscriber additions slackened pace in 2009, and its stock was one of the few that lost ground on the benchmark Sensex index in 2009.
On Tuesday, Bharti’s shares were up 0.1% at 329.25 rupees on the Bombay Stock Exchange. News of the acquisition has been doing the rounds for a few weeks now and investors are likely to have already factored in the potential impact.
“Bharti has a unique business model which could work well in large population countries such as Bangladesh. SingTel has a 45% stake in Pacific Bangladesh Telecom and we believe there could be some consolidation in the Bangladesh mobile sector,” UBS analysts said in a note Monday. “Bharti management has good discipline in allocating capital,” it said. UBS analysts have had an unchanged “Buy” rating on the stock for the last 12 months.
This is Bharti’s second buy outside India, after launching mobile services in Sri Lanka in January 2009.