Bharti Airtel shares surge 5%, associate Singtel stocks slide after Telenor takeover news

The Telenor shares were up for the past few days and at Wednesday's close, the Norwegian stock was up 2.8% so far this week.

Singtel to invest S$2.47b to buy stakes in InTouch, Bharti Telecom
A Singtel logo is pictured at their head office in Singapore Reuters

The price war among India's telecom companies is now more interesting for Singapore as Bharti Airtel, whose second largest share holder is Singapore Telecommunications, is going to buy Norwegian Telenor's Indian arm.

Singtel shares were down 0.75% at 2:15 PM in Singapore while Bharti Airtel was trading nearly 5% higher in Mumbai. The Telenor shares were up for the past few days and at Wednesday's close, the Norwegian stock was up 2.8% so far this week.

India's richest man Mukesh Ambani launched Reliance Jio's 4G network in September with an audacious free service for the rest of 2016, followed by vastly cheaper data plans and free voice calls for life, a Straits Times report noted.

The move forced rivals - desperate to maintain market share - to slash their tariffs and scrambling to match the deep pockets of Jio, which is backed by Ambani's vast energy-to-chemicals conglomerate Reliance Industries.

Bharti's acquisition, which still needs to be approved by regulators, will enhance its coverage, the company said in a statement to the Bombay Stock Exchange (BSE) on Thursday (Feb 23). It also means Telenor will exit India.

"The proposed acquisition will include transfer of all of Telenor India's assets and customers, further augmenting Airtel's overall base and network," the Indian firm said in the statement. It did not disclose financial terms of the deal.

Last month British mobile phone behemoth Vodafone announced that it was in talks to merge its Indian unit with Mumbai-based Idea Cellular in a move that would create India's largest telecoms company. Global brokerage firm CLSA estimated that the pair would command a combined 43% share of market revenue, ahead of Airtel, which is currently the market leader, on 33%.

"The decision to exit India has not been taken lightly," Sigve Brekke, Telenor Group CEO, said in the statement. "After thorough consideration, it is our view that the significant investments needed to secure Telenor India's future business on a standalone basis will not give an acceptable level of return," he added.

Singtel Plans

Singapore Telecommunications has been in news recently as it is preparing for an initial public offering to divest more than 75% of its wholly-owned fiber broadband network unit NetLink Trust.

It may use the proceeds from the share sale for capital management and investments, and could return any excess capital to shareholders, according to a recent Bloomberg article.

Profit contributions from NetLink Trust, along with its Indonesia and Philippine investments, helped offset declines from Thailand and India in the fiscal third quarter ended Dec. 31, according to a statement to the Singapore Exchange. Net income contribution from NetLink Trust increased 42 percent to S$32 million ($23 million).

This article was first published on February 23, 2017