Bharti Airtel reduces some of its debt

Bharti Airtel International (Netherlands) BV had started cash purchase of $1.5 billion, 5.125 per cent Guaranteed Senior Notes due in 2023

  • Published 24.11.18, 1:27 AM
  • Updated 24.11.18, 1:27 AM
  • 2 mins read
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Airtel Office in Gurgaon Shutterstock

Bharti Airtel has completed its tender offer to buy back bonds worth $1.5 billion. The telco’s offer saw investors tendering bonds worth over $994 million.

“Valid tenders were received with respect to $99,48,85,000 principal amount of the notes when the offer ended on November 21,” the company said in a filing to the stock exchanges.

Bharti Airtel International (Netherlands) BV had started cash purchase of $1.5 billion, 5.125 per cent Guaranteed Senior Notes due in 2023.

The tender offer by Airtel was part of its efforts to “proactively manage capital structure, reduce gross debt and leverage by acquiring the notes funded out of equity proceeds and also provide liquidity to noteholders at a premium to the market”.

The pre-payment will be done through the proceeds that it had received from six global entities investing in its Africa unit.

Bharti Airtel International’s (Netherlands) parent Airtel Africa Ltd, a UK incorporated subsidiary of Bharti Airtel Ltd, had made a primary equity issuance of $1.25 billion to these investors which included Warburg Pincus, Temasek, Singtel, SoftBank Group and others.

During the second quarter ended September 30, Bharti Airtel had declared a net profit of Rs 119 crore which marked a fall of 65 per cent over the same period last year.

Mobile service revenues from India fell 16.3 per cent to Rs 10,252 crore compared with Rs 12,245 crore in the corresponding quarter last year because of continued contraction in the average revenue per user (ARPU).

Revenues from India mobile services contribute close to 68 per cent of its total revenues. For the company, the overall ARPU for the quarter stood at Rs 101 compared with Rs 142 in the year-ago period.

Deep distress

India’s telecom sector is in deep distress, with Bharti reporting a sharp fall in profit, while Vodafone Idea reported almost Rs 5,000-crore loss in the second quarter.

A company document said Vodafone Idea was in the process of reducing the number of its distributors by 16,000 and branded stores by 2,000 by the end of this fiscal. The company plans to reduce the number of its distributors from around 43,000 to 27,000 by December.

Vodafone Idea has around 6,000 branded retail stores across the country, which it plans to cut to 4,000 by March 2019, the document said. 

BURDEN REDUCED BY ALMOST $1BN

What did Airtel do?

Step 1: Six global investors bought shares worth $1.25bn in Airtel Africa. Investors included big names such as Warburg Pincus, Temasek, Singtel, SoftBank Group

Step 2: Bharti Airtel International (Netherlands) BV, a subsidiary of Airtel Africa, offers to buy back bonds worth $1.5 billion. It uses the proceeds from the equity sale to buy the bonds. So far, almost $1 billion have been tendered for buyback.

Airtel, thus, reduces its debt with equity, which improves its financials