New Delhi, Oct. 28: Vodafone, the '34-billion British telecom operator, returned to India after a gap of over two years with a Rs 6,700-crore deal to buy a 10 per cent stake in Bharti Tele-Ventures Ltd (BTVL).
The deal is the biggest in India’s telecom industry and easily dwarfs Essar group’s acquisition of a 67 per cent stake in BPL Communications for Rs 4,400 crore in July.
Vodafone will get a 4.4 per cent indirect stake in BTVL by buying an undisclosed stake in holding company Bharti Enterprises. It will get an additional 5.65 per cent stake in BTVL (106 million shares) from Warburg Pincus, a US private equity fund, at an average share price of Rs 351.
The stock purchase price works out to an almost 7 per cent premium to the market price. On Friday, the Bharti Tele-Ventures stock closed on the Bombay Stock Exchange at Rs 329.20, up Rs 17.25.
Warburg Pincus, the oldest financial investor in the company, will pick up Rs 3,700 crore from the sale of its stake to Vodafone. The Mittals, who own Bharti Tele-Ventures, will get about Rs 3,000 crore.
Bharti Enterprises has a controlling interest of 45.9 per cent in BTVL through its subsidiary, Bharti Telecom.
Rumours of Vodafone’s interest in Bharti have swirled for quite sometime but the naysayers said it would never happen as long as SingTel (2005 revenues: $7.65 billion) stayed invested in Bharti Tele-Ventures. SingTel has a 15.69 per cent stake in BTVL.
Vodafone, which had a near 21 per cent stake in RPG Cellular, exited the country in 2003, selling its entire stake to C. Sivasankaran’s Aircel.
The world’s largest mobile phone company by revenue has an Indian at the helm ' Arun Sarin, who graduated from IIT Kharagpur in 1975 before going to the US.
Sarin said, “We have taken an economic stake of 10 per cent in BTVL for $1.5 billion. Through this we plan to bring in new products and services and reach the rural parts of the country. We bring a lot of passion and commitment in our services.”
“We are also here today because of lifting of the FDI norms in telecommunications by the government, without which the deal could never have happened,” said Sarin.
Vodafone has submitted an application to the Foreign Investment Promotion Board (FIPB) seeking permission to bring funds into the country.
Earlier in the day, Sarin and Bharti chief Sunil Mittal met Prime Minister Manmohan Singh to apprise him about the largest single foreign investment into the country.
“A representative from Vodafone will sit on the BTVL board and we will bring more professionals to help promote the services,” said Sarin.
“The promoters stake will be effectively less than 49 per cent. We will invest the money in new ventures. Currently, we do not have any plans. It would not be used for telecom as there are enough funds already earmarked for it,” said Mittal.
Sarin refused to say whether Vodafone planned to raise its stake in Bharti or acquire holdings in other telecom companies.
SingTel, the largest investor in BTVL, said they were happy to get a new partner. Lim Toom, CEO of SingTel, said, “Vodafone is the world’s largest mobile operator and has a dominant presence in Europe. SingTel has major presence in Asia-Pacific. Both our foot prints are complementary.”
Vodafone also provided an additional Rs 51 crore to Bharti foundation which provides primary education and mid day meals at village schools.