Warburg to buy 20% stake in Bharti Telemedia for $350 million
Bharti Airtel will use the funds to pare debt.business Updated: Dec 13, 2017 10:50 IST
Bharti Airtel Ltd and another group entity will sell a combined 20% in its satellite TV unit, Bharti Telemedia Ltd, to private equity firm Warburg Pincus for $350 million as India’s largest telecom company seeks to cut debt.
The transaction will see Bharti Airtel sell 15% in Bharti Telemedia and another Bharti entity sell a 5% stake to an affiliate of the private equity firm, the telecom company said in a statement on Tuesday.
Bharti Airtel will use the funds to pare debt, said a person aware of the company’s plans requesting not to be named.
The parent company will own an 80% stake in Bharti Telemedia on completion of the transaction, the company said. Bharti Telemedia offers services to 14 million users under the Airtel TV brand in India. It reported $550 million in revenue in the 12-month period ended 30 September.
Viraj Sawhney, managing director of Warburg Pincus India, will join the board of Bharti Telemedia Ltd after the transaction is completed.
Warburg Pincus was one of the early investors in Bharti. The PE firm had invested up to $300 million in Bharti Televentures Ltd, which was renamed Bharti Airtel in 2006, between 1999 and 2001 for about 19% stake.
In 2002, Airtel decided to list itself on BSE that saw a reduction of Warburg’s stake to 15% and later the private equity firm exited the company gradually. The stake sale fetched Warburg about $1.6 billion—about six times its original investment.
Bharti Telemedia is the third-largest direct-to-home (DTH) company in India with a 21% market share as of June, according to a report released by the Telecom Regulatory Authority of India (Trai). There are five other private DTH operators— Dish TV India Ltd, Tata Sky Ltd, Videocon d2h Ltd, Sun Direct TV Pvt. Ltd and Reliance Big TV. In addition, state broadcaster Doordarshan also runs a DTH platform for free-to-air channels called DD Free Dish.
In 2016, Dish TV announced the merger of its business with Videocon d2h to form a combined entity called Dish TV Videocon Ltd. The transaction is awaiting regulatory approvals. The DTH market has changed a great deal with the advent of content delivery platforms such as Netflix, Amazon and Hotstar that have made inroads into urban homes. But Warburg seems to believe that DTH still has a lot of potential.
“The Indian Digital TV market is expanding rapidly and we believe that Airtel DTH is well positioned to capitalize on incremental growth in digitization and new TV penetration in Tier 3 and 4 towns and rural areas,” Vishal Mahadevia, managing director and co-head, Warburg Pincus India. Gopal Vittal, in the company statement, said that DTH space remains “an attractive and fast growing space”.
Airtel’s average revenue per user from mobile services in India was Rs 145 in the September quarter while the corresponding average revenue per user from its digital TV business was much higher at Rs 233.