Friday, February 19, 2010

SingTel Update

SingTel's Indian associate Bharti Airtel has made a US$9 billion bid to buy Kuwait based Zain's African assets. Bharti is South Asia's biggest mobile phone company and contributed fourth-quarter profit of S$235 million to SingTel which owns almost a one-third stake in it. Last year, Bharti was engaged in merger talks with South Africa's MTN Group but the deal was hampered due to the regulatory hurdles.

If the takeover is successful, Bharti would gain a foothold in Africa's mobile market. The handphone penetration rate in Africa is very low where only 36 out of 100 people own a mobile phone. In developed countries, there are often more mobile phones than people.

It is still not clear how SingTel's shareholders will benefit from the indirect exposure to the African mobile phone market.


Dou said...

I am not sure on how market will react on Singtel increase of stake but i personally feel this is a "not good" news for sing tel

stockscreener said...

Hi Dou,

Care to share why you think this is not good news for SingTel?

I think there is some concern out there that the debt used to fund the purchase would put some pressure on Bharti's balance sheet.

Others are also concerned that Bharti is overpaying for a poor performing asset.

I guess we will just have to wait and see what the results are. Looks like the deal will be closed in April this year.

Dou said...

MUMBAI (Dow Jones)--Bharti Airtel Ltd. (532454.BY) isn't exploring the option of Singapore Telecommunications Ltd. (Z74.SG) part funding the Indian telecom operator's proposed deal to acquire the African assets of Kuwait's Mobile Telecommunications Co. (ZAIN.KW), Bharti Chairman Sunil Bharti Mittal said Friday.

Haha the deal is off already

stockscreener said...

I think it will be funded by a mixture of cash and debt at Bharti's end. So not necessarily will be called off.

The thing is that the assets they are thinking of buying are not really high performing assets. So hopefully after buying it over, they will carry out some cost cutting measures to make the business more profitable.

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