Bharti to buy 70% of Warid for $300m

Ruth David
13 Jan 2010

India’s largest cellco Bharti Airtel has agreed to pay $300 million for a 70% stake in Bangladesh operator Warid Telecom.

Bharti said Tuesday it will purchase the 70% stake in Warid from the Dhabi Group, whose 100% interest in Warid will fall to 30% after the transaction is finalized.

Bharti will also subscribe to fresh equity in Warid and pump funds into the company to expand the network and introduce new services.

“As a result of this additional investment, the overall investment in the company will be in the region of $1 billion,” Bharti said in a statement. Investors weren’t too impressed with Bharti’s first international buyout, however, with the stock falling 2% on the Bombay Stock Exchange.

“Bangladesh, with a population of over 160 million and teledensity of 32%, is a very promising market for telecom services,” said Bharti Airtel chairman and managing director Sunil Mittal. “In particular, we look to leverage our rich experience in taking mobile telephony into rural areas and expand our services to the deepest pockets of Bangladesh and double the teledensity in few years.”

As of November 2009, Warid had 2.92 million subscribers and a market share of 5.9%, making it Bangladesh’s fourth largest mobile operator.

Analysts remain cautious on the Warid deal.

“Based on $2.5 ARPU (optimistic given it is similar to much larger operators), we estimate the revenue run-rate of Warid could be approximately $90 million per year and EBITDA at approximately $15-20 million at best,” Citigroup analysts said in a report. “As a result, the acquisition of Warid is akin to Bharti acquiring a new telecom license. It will hope to leverage on brand and vendor relationships, although low tariffs and a reasonable level of competition would imply a long haul [investment] for Bharti.”

Bharti’s Warid deal comes as cellular growth in India has slowed to a crawl.

The deal also follows two failed attempts by Bharti over last two years to merge with South Africa telco giant MTN. In 2009, the company ventured into neighboring Sri Lanka, launching mobile services in January.

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