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Telecommunication

Bharti Airtel seeks extra $3 billion amid India telecom price war

Company plans to issue equities, bonds

Unrelenting price competition from the Mukesh Ambani-backed Reliance Jio Infocomm has poses a threat to Bharti Airtel's financials.   © Reuters

MUMBAI (NewsRise) -- Indian mobile phone carrier Bharti Airtel aims to raise $3 billion to pay the money owed to the government and bolster its balance sheet, even as competition from billionaire Mukesh Ambani-backed Reliance Jio Infocomm shows no signs of abating.

Bharti, about a third owned by Southeast Asia's biggest wireless carrier Singapore Telecommunications, Wednesday said it plans to raise $2 billion via qualified institutional placements and $1 billion through bonds. The fundraising plan comes after the company raised about $4.6 billion in March. The debt-ridden carrier, along with larger rival Vodafone Idea, is scrambling to cough up funds after India's Supreme Court upheld the telecom department's demand for $13 billion in dues from operators.

The country's telecom industry, which has been pushed to losses amid the intense price competition triggered by the entry of Reliance Jio more than three years ago, is barely setting its financials in order by getting a two-year moratorium on some of the payments due to the government and implementing the first increase in call rates in three years.

Both Vodafone Idea and Bharti have, earlier this week, raised prepaid call tariffs by more than 40%.

Reliance Jio, too, increased its rates, though the quantum of its hike is lower than its rivals, indicating that the price war is far from over. Jio, which rolled out wireless services more than three years ago, offering free voice calls and cut-rate data tariff, has been instrumental in eroding the profitability and revenue of the industry. The intense competition pushed the sector to consolidate into a four-player market, with three private-sector operators besides state-owned Bharat Sanchar Nigam Ltd.

For Bharti, saddled with more than $16 billion in debt, the latest fund-raising paves the way to mend its balance sheet.

The fundraising is likely aimed at increasing preparedness to pre-empt a possible lack of relief on the government demand for dues, Citi Research said Thursday.

"This would also help Bharti strengthen its balance sheet for future investments in network capacity and spectrum in order to be better positioned to capture market share from weaker incumbents," Citi said.

The company, backed by billionaire Sunil Mittal, and Vodafone Idea faced a setback in October, when India's top court upheld the government demand that wireless carriers pay $13 billion of dues and penalties over a dispute in the way the industry calculated the adjusted gross revenue, or AGR. Bharti's total AGR liabilities stood at about $4.8 billion. The two companies have filed a petition with the court seeking a review of the October ruling.

Both the companies racked up combined losses worth $10 billion in the last quarter, after they set aside money to adhere to the court order. The ruling also put Vodafone Idea on a sticky wicket, raising concerns about the company's solvency.

Shares of Bharti Airtel lost 3% in Mumbai trading on Thursday while that of Vodafone Idea closed down 5.6%. Reliance Industries, which owns Jio, lost 0.1%. The benchmark S&P BSE Sensex fell 0.2%.

--Dhanya Ann Thoppil

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