Telecom operator Bharti Airtel on Wednesday said it has raised USD 750 million (about Rs 5,330 crore) from investors based in Asia, Europe and the US through a hybrid financial instrument.
Bharti Airtel said in a statement that “its wholly-owned subsidiary Network i2i Limited, has priced … offering of USD 750 million 5.650 per cent subordinated perpetual securities.”
A perpetual bond is a fixed income security with no maturity date that yields a steady flow of interest payments.
The company said it will use the proceeds for refinancing, investments in subsidiaries and general corporate purpose.
As on June 2019, Bharti Airtel’s total debt stood at a staggering Rs 1.16 lakh crore. The mega fund raiser comes just months after Airtel raised Rs 25,000 crore through a rights issue.
Bharti Airtel’s Treasury Head Ashish Sardana said in the backdrop of the current global economic environment, the strong response for its inaugural hybrid securities offering from high quality investors across Asia, Europe and the US underlines the future growth potential of its business.
“The securities have been distributed to fund/asset managers, insurance companies etc,” a banker closely involved in the transaction told PTI.
Barclays Bank PLC, BNP Paribas, Citigroup Global Markets Limited, HSBC, JP Morgan Securities, Merrill Lynch (Singapore) Pte Ltd and Standard Chartered Bank acted as joint bookrunners for the offering.
The telecom sector has been battered by falling tariffs, eroding profitability and mounting debt in the face of stiff competition triggered by disruptive offerings of Reliance Jio, owned by Mukesh Ambani.
But with the market for voice and data growing at an explosive pace, telecom operators have been investing in strengthening networks and preparing war chests to protect their turfs.
Meanwhile, S&P Global Ratings has said it expects Bharti Airtel’s leverage to remain elevated over the next six to nine months, but improve gradually due to reduced capital spending and increasing stability in its India mobile operations.
“We estimate the issuance will improve the India-based telecom operator’s FFO-to-debt ratio (funds from operations to debt ratio) by about 50 basis points,” S&P Global Ratings said in a statement.
The move comes at a time the incumbent operators are facing acute financial stress and are also experiencing subscriber churn. With migration of services to 4G technology, incumbent telecom operators are required to add more base stations to their network to support quality of service for mobile calls.
According to data published by the Telecom Regulatory Authority of India (TRAI) last month, Reliance Jio has the widest 4G network in the country with more than 7.46 lakh 4G base stations. Bharti Airtel’s 4G coverage is less than half of Reliance Jio’s but it has expanded its network more than three-folds since September 2017.
Airtel’s 4G network more than tripled from 97,130 base stations (BTS) to over 3.26 lakh BTS.
While margins are abysmally low in the telecom sector these days, service providers continue to make investment in the network to hold on to their existing customers base.
Bharti Airtel had posted a loss of Rs 2,866 crore for the June quarter, its first consolidated loss in 14 years, as it lost ground to rival Reliance Jio and took a hit from exceptional items such as charges towards accelerated depreciation of 3G network gear.
Airtel had logged a net profit of Rs 97 crore in the June quarter of the previous fiscal.
The revenue of the company rose 4.7 per cent to Rs 20,738 crore during the first quarter ended June 2019. PTI PRS