Vodafone's Bharti Buy Gives A Passage To India
LONDON -(Dow Jones)- U.K. mobile telecommunications company Vodafone Group PLC Friday said it has bought a 10% stake in India's largest wireless operator Bharti Tele-Ventures Ltd. (532454.BY) for GBP820 million in cash.
Vodafone has repeatedly cited India as a market it is interested in investing in as it looks to boost its exposure to under-penetrated, high-growth emerging markets. This latest deal follows Vodafone's purchase of Czech and Romanian mobile operators earlier this year.
"This transaction is consistent with Vodafone's strategy of developing our global footprint in growth markets," Vodafone Chief Executive Arun Sarin said in a statement.
European telecoms operators are keen to gain more exposure to fast-expanding Asian regions, as it is increasingly difficult to wring growth from their domestic markets. Norwegian incumbent Telenor ASA has activities in Bangladesh and Pakistan and this month moved to gain more control of its business in Thailand.
Vodafone said India is the third-largest mobile market in Asia with 65.1 million subscribers, having grown 54% year-on-year. Despite only trailing China and Japan in customer numbers, just 6% of Indians have a mobile phone, and 4.4% have fixed-line telecoms. In western Europe, some markets have mobile penetration rates of 100% or more.
Vodafone said the deal to snap up 10% of Bharti is equivalent to INR351 a share, representing a 7.4% premium to the five-day average share price on Oct. 27. Under the terms, Vodafone will buy 4.39% in Bharti through Bharti Enterprises Private Ltd. and a 5.61% direct stake from private equity firm Warburg Pincus LLC.
The transaction is expected to be immediately augment Vodafone's adjusted earnings per share, and the acquisition won't impact its share buyback program, the company said.
"It's a step in the right direction," said ING Financial Markets analyst Damien Chew, who noted that Vodafone has captured a slice of a rapidly-growing emerging market player, in line with its strategy. It is a relatively small deal for Vodafone, representing less than 1% of its own market capitalization, he added. He rates the stock at hold. AT 0741 GMT, Vodafone shares were 0.4%, or 0.5 pence, higher at 141 pence.
Bharti is the fastest-growing mobile operator in India and is one of only three mobile operators with a nationwide footprint. It had 14.1 million customers at the end of September, a 62% year-on-year increase, and equivalent to a 22% market share.
In the six months to the end of September, Bharti's mobile business grew revenue 58% and earnings before interest, taxation, depreciation and amortization, or EBITDA, 64%. Bharti's fixed-line business boosted revenue 30% and EBITDA 34% in the same period.
Vodafone said it has the right to appoint two directors to Bharti's board.
Singapore Telecommunications Ltd. (T48.SG) owns a 30% stake in Bharti.
Company Web site: http://www.vodafone.com
-By Nic Fildes, Dow Jones Newswires; 44-20-78429264; nicolas.fildes@dowjones.com
(END) Dow Jones Newswires "
Posted to the site on 28th October 2005