Bharti Gets $1.26 Billion Investment From Qatar Foundation

Bharti Airtel Ltd., India’s largest mobile-phone operator, will sell a 5 percent stake to the Qatar Foundation Endowment for $1.26 billion after the carrier posted quarterly profit that missed estimates.

Bharti will issue 199.9 million new shares to the Qatar endowment at 340 rupees ($6.3) each, according to an e-mailed statement from the New Delhi-based company. That’s 7.3 percent higher than yesterday’s closing price. The stock closed 0.3 percent higher after climbing as much as 4.7 percent in Mumbai.

Billionaire Chairman Sunil Mittal has seen Bharti’s earnings decline for two straight years while debt has climbed almost sevenfold since 2010, according to data compiled by Bloomberg. The company raised $1.5 billion last month to help fund $2.3 billion of capital spending after interest costs contributed to a 49 percent decline in net income in the March quarter, according to results released yesterday.

“Bharti’s debt is significant, more than they should be comfortable with,” said Amar Mourya, an analyst with Mumbai-based India Nivesh Securities. “There will be further pressure on their balance sheet ahead, with license renewals and other expenses coming. With cash flows not being able to sustain these expenditures, they were forced to raise cash through equity.”

Spectrum, Acquisition

Bharti bid 123 billion rupees in the 2010 auction of third-generation wireless permits to introduce broadband services and tap India’s growing market for consumption of mobile data such as downloading applications and streaming videos. The sale was followed by the company paying $9 billion to buy the African business of Kuwait’s largest mobile-phone operator Mobile Telecommunications Co., also known as Zain.

Ashutosh Sharma, a New Delhi-based spokesman for Bharti, didn’t immediately respond to requests for additional comment. Calls to the Qatar Foundation’s headquarters in Doha weren’t answered before business hours.

The endowment is the investment arm of the state-controlled Qatar Foundation. Qatar is the wealthiest nation per capita in the world, according to the International Monetary Fund.

Bharti, the leader in the world’s second-largest mobile market of about 860 million subscribers, has scuffled with competitors in a market where call rates are among the lowest in the world.

Mittal is trying to contain costs as Bharti prepares for license renewals and regulatory changes. The company has increased call rates to cover some costs by removing discounts on tariff plans, Chief Financial Officer Sarvjit Singh Dhillon told investors on Feb. 1.

‘Start Outperforming’

“The worst seems to be over for Bharti,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi, southern India. “The stock has rallied sharply over the past few days, hence investors are not seeing much value. It should start outperforming the broader market in the next three to four weeks.”

Bharti has gained 18 percent since April 5, when the stock hit its lowest in five months. They closed at 317.70 rupees in Mumbai. The benchmark S&P BSE Sensex fell 0.8 percent.

Net income fell 49 percent to 5.09 billion rupees in the quarter ended March, Bharti said yesterday. That missed the 7.6 billion-rupee median of 27 analysts’ estimates compiled by Bloomberg.

Revenue rose 9.2 percent to 204.5 billion rupees, lagging behind the median estimate of 208 billion rupees.

Criminal Investigation

Bharti’s mobile-phone users in India and South Asia increased to 196.1 million at the end of March from 189.4 million at the end of December, the company said. Subscribers in Africa rose to 63.7 million from 61.7 million.

Mittal, who started his business in the 1970s selling bicycle parts, was charged last year with acquiring more mobile-phone spectrum than the government allowed. His case is working through the Indian courts.

India’s Central Bureau of Investigation filed criminal charges in December against Bharti, along with government officials and two other carriers, over purchases of wireless spectrum that led to a loss of about 8.5 billion rupees to the exchequer.

The legal battle over India’s airwaves has fueled a 95 percent drop in overseas investment in the wireless market.

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