Singtel to contribute $525M amid Airtel’s $4.6B capital raise

Airtel CEO Gopal Vittal touted the company's financial flexibility to compete in the "rapidly transforming Indian mobile market." (Airtel)

Bharti, the parent company of India’s largest wireless operator Airtel, has released details on how it plans to raise $4.6 billion in hopes of improving its capital structure and freeing up money for network investments, as competition among wireless carriers has heated up extensively in India. Airtel will raise some $3.6 billion by selling shares in a rights issue and will raise another $1 billion with a bond issue.

Singapore carrier Singtel, the largest stakeholder in Airtel, along with fellow shareholder Bharti Group will participate in the rights issue. Bharti Telecom will cede $700 million of its shares of Airtel to GIC Singapore. Altogether, the four companies will account for 67% of the rights issue, amounting to roughly $3 billion.

Singtel’s investment of $525 million will dilute its effective share of the company from 39.5% to 35.2%. “Airtel has performed well despite business headwinds and is consolidating its position in a more sustainable market,” said Arthur Lang, CEO of Singtel’s International Group, in a release. “With smartphone and mobile data adoption continuing to grow at a rapid rate and the positive momentum from the government’s Digital India initiative, the opportunity for growth remains huge.”

“The rights issue reiterates the confidence of our shareholders in the competitive strength and sound business strategy of Airtel,” said Gopal Vittal, managing director and CEO of Airtel. “It shall further strengthen our balance sheet with desired financial flexibility so as to meet future opportunities, particularly in the rapidly transforming Indian mobile market.”

India is the second-largest telecom market in the world, though most of the mobile users rely on a 2G network. The wireless market received an injection of competition when startup wireless provider Reliance Jio launched a 4G LTE network, spurring a data war between the carriers.

Earlier this year, Singtel reported a 14% dip in profit in the third quarter, while Airtel’s earnings plunged 75%.

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