Singaporean telecom major SingTel, which holds a 30 per cent stake in Bharti Airtel, may see its holding dilute to about 19.4 per cent if the Indian firm's merger deal with South African MTN goes through, a global financial services firm has said.
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 Citigroup report said.
However, after Bharti Airtel and MTN announced renewal of talks for a possible merger yesterday, a SingTel spokesperson said: "Talks between Bharti and MTN are in the early stages. SingTel, a major existing shareholder of Bharti, will continue to be a strategic partner and a significant shareholder after implementation of potential transaction."
Citigroup estimates that the deal with MTN would modestly impact Bharti Airtel's earnings while it would marginally affect the group's consolidated earnings.
'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, the 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.
On Monday, Bharti and MTN signed an agreement to hold exclusive talks for a deal that could include $10 billion in cash and $13 billion in shares and see emergence of a combined entity of USD 20 billion in terms of revenue and 200 million subscribers globally.
As part of the proposed deal, Bharti would acquire a 49 per cent stake in the South African player, while MTN would buy a 36 per cent stake in the Indian firm.
