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Now government has allowed FDI upto 74% in telecom companies. Sunil Mittal has been lobbying for it for long. So what will he do next - considering Singtel can take upto 49% stake in the company (Singtel already has substantial share in Bharti ). Will Sunil Mittal try to maintain control over Bharti or will try to cash out.
Some indications suggest that he himself is not very sure of future of GSM Vs CDMA in India. Secondly he has shown inclination towards retiring from telecom business. He may take up some peaceful low profile business or he may become a venture capitalist. The possibility of second option is higher.
This is the right time for Mittal to cash out. The market capitalization of the company is high, its main competitor (Reliance) is in trouble right now, FDI has been allowed and above all GSM players who don’t want CDMA to succeed in Indian market are ready to pay a premium for stake in Bharti.
Mind you I don’t have any doubts about the competitiveness of Airtel business. In fact even when the market matures and there is a shake out, I believe Bharti would be one of the survivors. Considering today’s scenario if the ‘rule of 3’ situation arise the First two on anybody’s list would be Reliance and BSNL & MTNl combine. Which means Bharti would be fighting for the third spot with like of Hutch, IDEA, Tata Telecom etc.
One other reason why Bharti may opt to cash out is that he know that he can’t control the company for long. Huge investments are required to stay competitive in this sector and unlike its competitors, Mittal donot have deep pockets. Sooner or later it will have to go for dilution of stake which would lead to conceding of control to likes of Singtel.
The most probable scenario that appears to me is that Bharti would sell out the controlling stake to Singtel of other foreign investor in 12 months time. There would be an agreement that he would continue to be the CEO for the next two years or so. The details of the deal would be disclosed upfront. Slowly and smoothly the handover will take place with Sunil Mittal retaining less than 10% stake. He would retire from telecom and would become a venture capitalist with all the cash he would receive from selling his stake. Our estimation suggest that he can easily get Rs.25000 crores for his stake which is a very good price and Mittal may not be able to get the same valuation in future. It would be really interesting to see what he decides.
1 comment:
I think that bharti would be holding on to his guns a while longer in the near future...bharti tele is still on investment radars of most of the bigshots and even warburg still has considerable stake in it intact though that could be changed but not so soon.....so there's still juice in the scrip....sunil mittal has created a world class co and this is a time he needs to consolidate his brainchild.....It needs him.
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