The Competition Commission of India (CCI) has approved Bharti Airtel’s acquisition of an additional 20% stake in its direct-to-home (DTH) arm Bharti Telemedia from an affiliate of New York-headquartered private equity firm Warburg Pincus, people with knowledge of the matter told ET.
The competition watchdog is expected to publish a detailed public order on the transaction soon, one of the sources said.
While the transaction dates to 2021, the CCI in August 2023 slapped a fine of Rs 1 crore on Airtel for concluding the deal without informing it.
In October 2023, the telecom company sought the competition watchdog’s approval for the transaction that also involved Lion Meadow Investment, an affiliate of Warburg Pincus, acquiring a stake in Bharti Airtel, one of the persons cited above said. The CCI approved the transaction recently, the person added.
In its application to the CCI, Airtel said the transaction is an intra-group shareholding consolidation and does not constitute any change in market dynamics, the entry or exit of any player, or a change in the management of the business operations of BTL.
The application identified India’s upstream market for digital set-top box manufacturing and sale and the downstream market for aggregating and distributing TV channels through DTH services as relevant markets for the CCI’s review.
This is the second major deal to be completed in the DTH sector, following Tata Sons’ acquisition of Singaporean investment firm Temasek’s 10% holding in Tata Play for $100 million at a $1-billion valuation. Tata Sons now owns a 70% stake in Tata Play, with Walt Disney holding the rest.
Bharti Airtel acquired Lion Meadow’s 20% stake in Bharti Telemedia in February 2021 for Rs 3,126 crore through issuance of 36.47 million equity shares of Airtel at Rs 600 per share and up to Rs 1,037.8 crore in cash.
The stake acquisition, which will increase Bharti Airtel’s shareholding in Bharti Telemedia to 100% from 80%, valued the DTH firm at Rs 15,630 crore.
Bharti Telemedia, which provides DTH services under the Airtel Digital TV brand, had 16.1 million subscribers at the end of December 2023. It is the country’s second-largest DTH operator after Tata Play, which has 21 million subscribers.
The Warburg Pincus affiliate exited Bharti Telemedia in less than four years after acquiring a 20% stake in it for Rs 2,258 crore in December 2017, valuing the DTH arm at Rs 11,290 crore.
In FY23, Bharti Telemedia slipped into the red with a net loss of Rs 349 crore against a profit of Rs 465 crore in the previous year. The company’s revenue dropped 7% to Rs 2,949 crore.
While reaffirming the firm’s credit ratings, Crisil noted that Bharti Telemedia has made provision of around Rs 2,980 crore towards potential DTH licence fee liabilities, which are currently sub-judice.
The rating agency also noted that Bharti Telemedia’s liquidity remains strong, with cash and liquid investment at over Rs 250 crore as of March 31, 2023. It expects net cash accrual from operations to remain healthy at Rs 1,500–2,000 crore per annum over the medium term.
Source: Economic Times