Vodafone is considering increasing its stake in Bharti Airtel to 20% as part of its plans to double revenues from emerging markets.
MUMBAI: UK-based Vodafone Group plc, the largest mobile services provider in the world, is considering increasing its equity stake in Bharti Airtel to 20% as part of its plans to double revenues from emerging markets over the next three years.
Sources said the hike could be sewn up “in 2-3 months”.
In an email statement from the UK, a Vodafone spokesman confirmed the intent: “We are interested in increasing our stake in Bharti Airtel. However, any increase is dependent on other shareholdings being available for purchase. Such shareholdings are not currently available.”
That’s partly because Bharti Airtel has already hit the 74% ceiling for foreign investment as a result of a change in the way such shareholding is accounted for.
Earlier, foreign institutional investor (FII) holdings were excluded from the ceiling; now they are included.
Though the stock exchanges show Bharti Airtel’s promoters as holding nearly 46% through Bharti Telecom, their effective shareholding is much lower due to the induction of foreign partners at two levels.
While Singtel is a partner in Bharti Telecom, Vodafone is a partner in Bharti Telecom’s own holding company, Bharti Enterprises.
Last October, Vodafone picked up a 10% stake in Bharti Airtel for a sum of Rs 6,700 crore.
A part of the 10% stake came from venture firm Warburg Pincus (5.65%) while the rest came indirectly through the sale of shares in Bharti Enterprises, Sunil Mittal’s holding company.
Bharti Enterprises, in turn, holds a majority stake in Bharti Telecom, in which Singtel is the other shareholder.
Singtel is, thus, the largest single shareholder in Bharti Airtel with a 31% stake - 15.6% directly and the rest through Bharti Telecom.
Since foreign shareholding has effectively reached 74%, if and when Vodafone wants to increase its stake in Bharti, it can only buy the extra shares from FIIs or Singtel. Since Singtel has not indicated any intention to reduce its holdings, the FIIs, with 22%, are the best option.
It’s not clear whether something like that is in the works, but Jayant Khosla, chief executive officer of Bharti Cellular Ltd, declined comment on it. “When and if it will happen, you will come to know.”
A source in Vodafone confirmed that the company would consider hiking its stake only in Bharti Airtel, thus ruling out the possibility of picking up stakes in any other Indian telecom firm. Earlier, in June, 2003, Vodafone sold its 20.76% stake in RPG Cellular to Aircel, the largest mobile phone company in Tamil Nadu.
Currently, 15% of Vodafone’s global revenues come from emerging markets and the plan is to raise this to 30% in the next three years. India will play a major role in this growth.
Analysts say that the Indian mobile phone market is one the world’s fastest growing, driven by low tariffs and rising middle class incomes.
Vodafone has been investing in emerging markets as part of its global growth plans. It has invested in India, South Africa, China, Turkey, the Czech Republic and Romania in the mobile telecommunications business.
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