Bharti Airtel Ltd facing intensifying competition and a price war at home is looking to other markets in South Asia to enliven its bottomline.
First on the list is Bangladesh: A media report Wednesday said Bharti Airtel is looking to buy a 70% stake in Abu Dhabi-based Warid Telecom’s Bangladesh unit.
India’s biggest mobile-phone operator by subscribers declined to comment on any Warid deal, but a senior executive at Bharti Airtel’s parent confirmed a move to expand into the region.
“We have been interested in Bangladesh because we have an interest in countries in the SAARC region,” Akhil Gupta, deputy group chief executive and managing director at Bharti Enterprises, told reporters on the sidelines of an industry conference.
The SAARC–or South Asian Association for Regional Cooperation-region is made up of India, Pakistan, Bangladesh, Nepal, Bhutan, Sri Lanka and the Maldives.
India’s telecom market, which is the world’s fastest-growing in terms of subscriber additions, is seeing intense competition, which is driving down tariffs, hurting revenue and margins.
Bharti Airtel has been looking overseas for expansion to boost growth. The company has twice failed to seal a merger with South Africa’s MTN Group, with its latest bid earlier this year falling through due to regulatory hurdles.
In a separate statement, Bharti Airtel said: “We keep evaluating international expansion opportunities from time to time.”
Earlier Wednesday, news agency AFP said the Dhabi Group told the Bangladesh Telecommunications Regulatory Commission Sunday that it would sell 70% of Warid Telecom to Bharti Airtel.
“We have sought more papers and the copy of the memorandum of understanding between the two companies,” AFP quoted BTRC Chairman Zia Ahmed as saying.
Earlier in the day, Bangladesh’s Daily Star cited unnamed Warid officials as saying that the deal could be worth about $900 million.
But Bharti’s Gupta would only say that “I can’t talk about that (the deal with the Dhabi Group) unless something official happens.”
Officials at BTRC, the Dhabi Group or Warid Telecom’s Bangladesh unit couldn’t be reached for comment.
Commenting on the Bangladesh deal report, a Mumbai-based analyst who didn’t wish to be named said: “It is a strategic move as the company (Bharti Airtel) is looking at piecemeal acquisitions to consolidate its position in Asia by gaining a larger footprint.”
But the “reported valuations look very steep”, the analyst said, adding that Japan’s NTT DoCoMo Inc. last year paid $350 million to buy a 30% stake in Axiata (Bangladesh) Ltd., which is majority-owned by Malaysia’s Axiata Group Bhd.
At the end of October, Warid Telecom’s Bangladesh unit was the fourth-largest operator in the country with 2.79 million subscribers.
It trails leader Grameen Phone Ltd. with 22.30 million users, Orascom Telecom Bangladesh Ltd.’s 12.27 million and Axiata (Bangladesh) Ltd. with 10.99 million.
Shares in Bharti Airtel – which had more than 116 million users at the end of November – closed the day 2.8% higher at 325.75 rupees ($7) on the Bombay Stock Exchange, where the benchmark Sensex ended up 0.2%.
Mr. Gupta said also that the current price war in India is temporary and that a consolidation is inevitable in the telecom sector.
“The top two-three operators will have about 70%-75% market share, and after that, two operators will just be surviving, and below that, everybody will be struggling,” he said.
Currently, India has between eight and 10 operators in each of the 22 service areas that the country is divided into, with some new players just starting operations.
Mr. Gupta reiterated that the intense competition will hurt the company’s revenue and margins in the short term.
But he expects the company’s minutes of usage to rise as customers talk more following the launch of per-second billing plans and cuts in roaming rates.
“There will be new revenue streams coming,” Mr. Gupta added, referring to banking, money transfer, advertisements and other commercial services on mobile handsets.
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