Bharti Airtel announced that the Board of Directors of the company have created a ‘Special Committee of Directors’ on Wednesday. This has been done to look for option for potential restructuring of the teleco’s shareholding structures and businesses.
Bharti Airtel’s new Special Committee
The statement released on Wednesday by Airtel read, “The Special Committee of Directors has been set up to consider options for re-organisation of businesses and shareholding structure of the company and its units to achieve required flexibility and sharper focus on digital and non-telecom businesses to enable any unlocking of enhanced value for its stakeholders”.
The special committee will present recommendations to the Airtel Board of Directors for consideration and subsequent approvals. The rejig will involve creating a step-up company for Airtel in order to generate better synergies between Airtel Digital and Airtel Telecom.
Why does Bharti Airtel Need A Rejig?
Airtel Digital, the arm of Bharti Airtel Limited which contains Airtel XStream, Wynk Music, Airtel Thanks, Airtel Payments, Airtel IQ and Safe Pay. There are as many as 190 million subscribers with a total revenue around 100 Crores across all the companies under Airtel Digital. The Sunil Mittal-led company has around 1,500 employees in Airtel Digital. Plans are in the works to upscale rapidly.
Airtel Digital is being hampered by the regulatory overhang from telecom authorities in the country. That could change with the restructuring as it would make it easier for Airtel to focus on the Digital arm more freely. Bharti Airtel are targeting to upscale the revenue to Rs. 1000 Crores and list the firm in the coming 2 to 3 years.
The whole reason the rejig is in the works is in order to attract bigticket equity infusions from tech giants and private equity funds. Reliance Jio achieved something similar in 2020, with a total 1.52 lakh crores in capital raised from stakes sold in their digital services arm.
Parallels Between Bharti Airtel and Reliance Jio
Reliance Jio is one of the success stories of such moves within the organizations. Last year, the Mukesh Ambani-led teleco were able to raise upwards of 1.50 lakh crores by selling 33% stakes to 13 investors. These include tech giants such as Facebook, Google, Qualcomm and Intel. Airtel are planning to achieve similar results with this move.
Incidentally, Airtel have also decided to buy a 20% stake in their DTH arm, Bharti Telemedia for a total of Rs. 3,126 Crores. This stake was owned by a Warburg Pincus affiliate. This will be paid for by Airtel in 36.47 million shares at Rs. 600 each and up to Rs. 1038 Crores in cash. This move also comes in line with Bharti Airtel’s long-term ambitions. A total control over Bharti Telemedia will enable the company to better restructure within the firm. This also provides an exit to the said affiliate of Warburg Pincus. The exit results from the fact that Bharti Telemedia remains unlisted as the affiliate bought the stake in the DTH operator back in December 2017.
There is a key difference between the two. Reliance Jio is one monetized asset for Mukesh Ambani – Jio Services are still a part of Reliance Jio. However, Airtel are targeting a different approach in creating two monetized assets in Airtel Telecom and Airtel Digital.
If Bharti Airtel are able to replicate Reliance Jio’s results in terms of separating their telecom business from their digital business, it could create much value for the teleco. It will mean larger valuations, add new revenue streams and strengthen the existing ones, improve their efficiency and cut costs. A win-win.