Qatar divests from Bharti Airtel

A Qatari investor has decided to sell 5% of Indian telecoms company, Bharti Airtel. The sale will be around $1.46 billion.

Background

Bharti Airtel Limited is an Indian global telecommunications services company based in New Delhi, India. It operates in 18 countries across South Asia and Africa. Airtel provides GSM, 3G and 4G LTE mobile services, fixed line broadband and voice services depending upon the country of operation. Airtel is also testing VoLTE technology across five cities in India and should roll out the technology towards the end of 2017. It is the largest mobile network operator in India and the third largest in the world with 400 million subscribers. Airtel was named India's second most valuable brand in the first ever Brandz ranking by Millward Brown and WPP plc.

In June 2017, a Saudi Arabia-led bloc of nations in Gulf cut all diplomatic ties with Qatar. Qatar has remained isolated with the blockage of its air, sea, and land links. Saudi Arabia, UAE, Bahrain, and Egypt alleged that Qatar sponsored terrorism in the region – a charge that Qatar has denied. Qatar has been trying to keep its economy afloat since. According to Moody’s, Qatar used $38.5 billion of its reserve to support the economy since the impasse. Turkey and Iran have become Qatar’s main partners in trade after the blockade was imposed. The region’s exports of oil and gas have continued without any interruptions.

Analysis

In trend with the last few months, reports have emerged that a Qatari investor has decided to sell 5% of Bharti Airtel. The sale will amount to be around $1.46 billion (Rs 9,500 crores). In recent months, Qatari investors have sold stakes in foreign companies as it continues to struggle under the sanctions.

According to a report by Reuters, Three Pillars Pte Ltd, an affiliate of the Qatar Foundation, has put up 199.9 million shares of Bharti Airtel for sale through stock market transaction. The shares are priced at around Rs 473 and Rs 490 each. Reuters noted that it had seen and verified the deal term sheet. Three Pillars had paid Rs 340 per share back in 2013. The current sale has been priced at a range discount of 4.7-8 percent. The buyers included domestic and international investors.

Since June 2017, Qatari companies, including its sovereign wealth fund, have been cutting stakes in foreign companies and raising cash to withstand pressure on its economy. The nation’s investors have also cut its stakes in companies like Tiffany & Co, Russian energy giant Rosneft and Swiss bank Credit Suisse.

Shares of Bharti Airtel fell almost 6% within an hour of trade after the news was reported. The sale will reportedly take place on Friday. By the end of the day, the shares had recovered to Rs 496.30. This was 3.5% lower than the previous day.

Assessment

Our assessment is that the Saudi-led blockade has begun to choke the Qatari economy. The oil-rich nation has begun liquidating its foreign assets in order to pump money back into the economy in order to keep the economy afloat. This sale is unlikely to negatively affect Bharti Airtel in the long run as the company’s shares have performed robustly in 2017.