Bharti expects good terms for funding Zain deal | business | Hindustan Times
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Bharti expects good terms for funding Zain deal

Bharti Airtel will have clarity by next week on funding its offer for Kuwaiti telecom Zain's African assets and expects good pricing if it takes on debt, its chairman was quoted as saying.

business Updated: Feb 19, 2010 21:22 IST

Bharti Airtel will have clarity by next week on funding its offer for Kuwaiti telecom Zain's African assets and expects good pricing if it takes on debt, its chairman was quoted as saying.

In comments published on the website of CNBC TV18, Sunil Mittal also told the broadcaster he was confident of closing the $9 billion deal by the end of April.

Bharti and Zain are in exclusive talks until March 25 for the Kuwaiti firm's operations in 15 African countries and have agreed on an enterprise value of $10.7 billion for the assets, including $1.7 billion of debt on Zain Africa books.

The leading Indian mobile operator's market value has plunged 11.5 percent, or about $3 billion, this week since it confirmed the deal on concerns that possible high debt for funding the transaction could stretch its balance sheet.

The company's shares closed 1 percent down on Friday.

Debt is seen as the most likely option for the Indian firm, which currently has a low gearing, though media reports have also talked about other funding options such as a rights issue and a preferential allotment of shares to SingTel, which currently owns 32 percent of Bharti.

Mittal told the TV channel they were still discussing their funding plans.

"All we know is that this money is available. How do we want to pick it up? There are many ways to do this and that is precisely what is being discussed at the moment," he was quoted as saying.

"I would say by the end of next week we will have a clear picture."

ENOUGH POTENTIAL TO RAISE DEBT
"There is enough potential to raise debt," Mittal told the TV channel.

"So debt is coming from all around, everyone is very keen to fund it, but how much terms, give it a few more days."

Rating agency Standard & Poor's put Bharti on "creditwatch with negative implications", citing possible significant deterioration in Bharti's cash flow protection measures and weakening of its business risk profile after it enters Africa.

S&P said a potential debt-funded acquisition and the spending for India's upcoming 3G auction could increase Bharti's pro forma consolidated debt in 2010/11 to about 3 times EBITDA, from 1.4 times for the 12 months ended December 2009.

"It is going to be very good pricing, much better than even the last round," Mittal told the TV channel, comparing with loan commitments Bharti had received for its ultimately thwarted deal with South Africa's MTN.

"So I think there shouldn't be a cause of worry in terms of debt being expensive."

On concerns of EPS dilution, Mittal said the company had long-term expectations from the deal.

"We are not seeing this deal from what is happening to my EPS tomorrow. We are seeing what this can do for us over the next several years," he said.