SingTel stake is seen shrinking in Bharti Airtel after MTN deal

However, the firm can raise stake in future, a Citi report says

According to a report by the research arm of Citigroup, although SingTel will have no direct involvement in the Bharti-MTN deal, its holdings in Bharti may reduce due to the increased size of the merged entity. “...SingTel has no direct deal involvement and that the current 30.5 per cent (effective) stake in Bharti dilutes to 19.4 per cent. SingTel likely becomes a smaller shareholder in a larger entity,” the report said.

Citigroup estimates that the deal with MTN would modestly impact Bharti Airtel’s earnings while it would marginally affect the group’s consolidated earnings.

Modest growth

“We estimate modest four per cent dilution to Bharti’s earnings -– a marginal 1.2 per cent at the consolidated SingTel level,” the report stated.

Meanwhile, Citi report also expects that if the transaction proceeds and Bharti and MTN fully merge over time, there might be opportunities for SingTel to raise its stake. Further, SingTel stands to benefit from the combined entity becoming one of the largest emerging market telecom operators. In addition, delivery on synergistic benefits would boost earnings and asset value significantly. Bharti and MTN signed an agreement to hold exclusive talks for a deal that could include US$10 billion in cash and US$13 billion in shares and see emergence of a combined entity of US$20 billion in terms of revenue and 200 million subscribers globally.