SINGAPORE (THE BUSINESS TIMES) - Singtel on Thursday (Sept 23) said it intends to exercise its full rights entitlement for its direct 14 per cent stake in regional associate Bharti Airtel, to buy into the latter's 21,000 crore rupees (S$3.8 billion) rights issue at 535 rupees per share.
This translates to a total consideration of up to 29.4 billion rupees or US$405 million over a period of up to three years, said the telco in a regulatory filing, adding that the move signals Singtel's confidence in India as well as in Airtel's growth prospects.
Airtel's upcoming rights issue is subject to regulatory approval and slated to take place from Oct 5 to Oct 21 this year. Its board had earlier approved the fund-raising exercise on Aug 29.
Singtel in its latest statement said it believes funds raised through the rights issue will equip Airtel to invest in 5G capabilities and ride the digital growth momentum in India.
The group noted that this is in line with its strategic reset announced in May to build out digital ecosystems in the region, through a multi-local strategy that could involve unlocking assets to reinvest in critical infrastructure that will power the digital economy.
Citing an anticipated increase in the number of smartphone users in India and a steady rise in month-on-month growth in broadband connections, Singtel believes Airtel is seeking to capture "tremendous opportunities" in areas such as 5G, home broadband, data centres, cloud services and cyber security.
Singtel group chief financial officer Arthur Lang said he expects India's recently announced reform package to significantly improve Airtel's liquidity to invest in becoming a truly digital-first company that will serve India's digital vision.
Approved by the federal Cabinet last week, the telecoms sector relief package is expected to significantly reduce adjusted gross revenue (AGR)-related payments from telcos to the government going forward.
After already forking out 180 billion rupees for AGR-related payments, Airtel remains due to pay a further 259.76 billion rupees, for which there will be a four-year deferral.
"Buoyed by the unprecedented wave of digitalisation, Airtel is currently delivering strong revenue momentum across all business segments, reflecting the strength of its portfolio. All this will in turn enable Airtel to contribute sustainably to Singtel," said Mr Lang.
Shares of Singtel ended flat at $2.47 on Wednesday.