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Nikkei Markets

Singtel pulls in GIC for $1.2bn investment in India's Bharti

Singapore alliance committed to support telco as price war rages

Bharti said last week its board had approved a plan to raise $4.5 billion in new funds through a $3.5 billion rights issue and a perpetual bond with equity credit of up to $1 billion.   © Reuters

SINGAPORE (Nikkei Markets) -- Singapore sovereign wealth fund GIC will invest $700 million in Bharti Airtel, easing the pressure on Singapore Telecommunications whose ability to support the indebted Indian company has been called into question.

Bharti said last week its board had approved a plan to raise $4.5 billion in new funds through a $3.5 billion rights issue and a perpetual bond with equity credit of up to $1 billion. The move could have cost Singtel as much as $1.8 billion, since the Singapore telecom operator has an effective 39.5% stake in Bharti.

In its statement, Singtel said it will subscribe to 170 million new Bharti shares for around $525 million. GIC's $700-million investment will involve the fund taking up part of the rights held by Bharti Telecom, the holding company of Bharti. Singtel has stakes in both Bharti and Bharti Telecom.

"Our partnership with Airtel spans some two decades and we continue to take a long-term view of India," said Arthur Lang, the CEO of Singtel's International Group. "Airtel has performed well despite business headwinds and is consolidating its position in a more sustainable market," he added.

Singtel said it will continue to be the single largest shareholder in Bharti after the close of the rights issue, although its effective interest will fall to 35.2%.

The Indian telecom company had debt of around $15 billion by December end. Bharti, and Vodafone Idea, the market leader in India, have been locked in a ruinous battle for supremacy against Reliance Jio Infocomm, which is backed by Mukesh Ambani, Asia's richest man. Jio's cut-rate tariffs have triggered a wave of consolidation as its competitors tried to match the prices and added debt. For the three months ended December, Bharti posted a 72% fall in net profit, its 11th straight year-on-year earnings decline.

Besides paring debt, Bharti also needs to invest in networks and spectrum as the mobile industry shifts towards the new and more powerful 5G network.

Singtel is 52.3% owned by Temasek Holdings, the Singapore government's investment company. Singtel has to date invested some 4.68 billion Singapore dollars ($3.5 billion) in the Bharti group, which includes Airtel Africa, a company that operates in 14 African countries.

Temasek has, in the past, made joint investments with companies in its stable to alleviate pressures on the subsidiary's balance sheet. It is a separate entity from GIC, Singapore's main sovereign wealth fund with assets of some $390 billion, according to U.S.-based SWFI.

Last month, Singtel, which owns Optus in Australia, reported a 28% fall in underlying net profit for the three months ended December, hurt by lower contributions from its mobile associate companies. Besides Bharti, Singapore also has large stakes in Indonesia's Telkomsel, Thailand's AIS and the Philippines' Globe.

Early this week, ratings agency Moody's cut its outlook on Singtel's A1 credit rating to negative from stable, citing the weak earnings outlook as well as expectations the Singapore company will partially or fully subscribe to Bharti's rights issue.

Singtel responded to the cut by saying it remains financially disciplined and is committed to maintaining its investment-grade credit ratings.

--Kevin Lim

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