Bharti Airtel and Tata Tele announce ratio for demerger of consumer business

Earlier this year, Tata Teleservices (Maharashtra) had sold its consumer business to Bharti Airtel.

Dec 20, 2017 12:12 IST India Infoline News Service

Bharti Airtel
Bharti Airtel and Tata Teleservices (Maharashtra) Ltd (TTML) have announced a scheme of arrangement as part of Bharti’s takeover of TTML’s consumer wireless business. As per the scheme of arrangement, TTML shareholders would get 1 share of Bharti Airtel for every 2,014 shares of TTML.

In October 2017, Bharti had made an agreement with TTML to take over the latter company’s  consumer mobile business along with part of TTML’s spectrum liability. TTML has been under a lot of financial pressure to pay back near its debt of ~Rs 14,305cr. TTML posted a loss of Rs 8,194.67 cr in Q2FY18 mainly on account of write off due its consumer mobile business.

Bharti Airtel Ltd is currently trading at Rs 535.35, down by Rs 1.05 or 0.2% from its previous closing of Rs 536.4 on the BSE. The scrip opened at Rs 539.1 and has touched a high and low of Rs 540.75 and Rs 531.25 respectively. The stock touched a 52 week high of Rs 565 on 03-Nov-2017 and a 52 week low of Rs 289.25 on 26-Dec-2016. Last one week high and low of the scrip stood at Rs 539.95 and Rs 485 respectively.  The promoters holding in the company stood at 67.14 % while Institutions and Non-Institutions held 26.28 % and 6.55 % respectively. The stock is currently trading above its 50 DMA.

Bharti Airtel is a wireless operator with largest market share among domestic mobile service providers. As on September 30, 2017, Bharti Airtel had an Indian subscriber base of 28.2cr users in its wireless business. The company also had a user base of 1.35cr users in its Direct-To-Home (DTH) business. Further, Bharti Airtel had an overseas (Sri Lanka and Africa) subscriber base of 7.35cr users at the end of FY17. The company recently sold 20% of its DTH arm to Warburg Pincus for $350 mn.
 
We expect the company to report revenue de-growth of 0.4% over FY17-19E due to ~18% reduction in domestic ARPU over FY17-19E. However, EBITDA margin is expected to rise by 488bps to 41.8% in FY19E, as profitability of Airtel Africa would sharply improve due to subscriber growth of 9.2% over FY17-19E. We estimate PAT CAGR of 32% due to decreasing debt levels from asset disinvestment. The stock is currently trading at 29.2x FY19E EPS.

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