Sunil Mittal’s Bharti and Arun Sarin’s Vodafone are parting ways to become competitors in the Indian market and it’s been a very peaceful divorce.
Arun Sarin needed to sell some of Vodafone’s stake in Bharti before he can legally buy Hutch. Therefore, Sunil Mittal has obliged buying back 5.6 per cent of Vodafone’s stake in Bharti for $1.6 billion but he has got it very cheap.
Bharti is paying Vodafone just Rs 667 per share compared to Friday’s closing price of Rs 752. Although Bharti insists that it wants to hold on to the stake it has bought back, market analysts believe that the stake is likely to be resold at a premium to foreign players like Singtel.
In the process, Bharti Airtel would have pocketed a decent some, simply from trading in its own shares. Bharti Airtel has other reasons to be happy, that’s because Vodafone has got Hutch.
Vodafone has agreed to give half of Hutch’s NLD and ILD business to Airtel. Besides that, Vodafone’s own international subscribers will continue to roam in India on Airtel’s network.
“The ILD and NLD business is expected to bring in substantial revenues,” said Rajan Mittal, Vice Chairman, Bharti Enterprises.
Telecom infrastructure
Airtel would also get to share telecom infrastructure with Vodafone. The two companies would jointly use 70,000 telecom towers that would reduce their capital costs substantially.
However, would Vodafone’s entry intensify the tariff war in India’s telecom space? If not, Hutch under Vodafone would continue to focus largely on the premium segment.
If Anil Ambani had managed to win Hutch, things would have been very different for Bharti Airtel. Reliance Communications would have immediately become a bigger telecom player than Bharti, both in size and market capital.
It would have also cut out Bharti from Hutch’s long distance business as well. So, Sunil Mittal, the outsider in the entire battle for Hutch seems to have emerged as one of the big winners.
