Govt set to exit Bharti arm as ministries clear 30% stake sale

The decks have been cleared for the sale of the government’s 30% holdings in Bharti Hexacom, a subsidiary of the Bharti Airtel, the country’s largest mobile firm. All key ministries have given their approval to a Cabinet note moved by the department of telecom (DoT) on exiting Bharti Hexacom.

The government’s stake in Hexacom is held through Telecom Consultants of India (TCIL). Bharti Airtel holds the remaining 70% in Hexacom.

Bharti Airtel’s operations in six states — the North East (except Assam) and Rajasthan — are through Hexacom, and this subsidiary has just under 9 million subscribers.

As per DoT’s records, Hexacom had revenues of Rs 1,345.8 crore in 2007-08 and a profit of Rs 330.7 crore and a net worth of Rs 918.2 crore during the same period. The DoT’s estimates also add that these figures have increased significantly in 2008-09.

Following the nod from the all key ministries, the DoT will now approach the Union Cabinet seeking formal approval for the disinvestment. For the communications ministry, this marks the second major disinvestment move after the UPA regime came back to power. The DoT has already put three of the six units of the Indian Telephone Industries (ITI) on the block and has invited expressions of interest (EoIs) for the same.

TCIL had earlier tried to exit Hexacom in 2005-06, but decided against it and said that the price offered by Bharti Airtel was too low. Bharti Airtel had then offered Rs 262.5 crore for TCIL’s stake in Hexacom.

The department of disinvestment (of the ministry of finance), while giving the go ahead for the stake sale, in its reply to the DoT’s cabinet note has also added that legal advisers and valuers for the transaction should be appointed through a transparent process.

The disinvestment ministry has also added that the price offered by Bharti Airtel in 2005-06 and the reasons behind the DoT’s move not to exit the venture then must be included in the Cabinet note before it is sent for clearance.

The DoT has now decided on TCIL’s exit from Bharti Hexacom on account of two factors: First, TCIL had been seeking dividend payouts every year, a request that Bharti group has constantly turned down on account of the ‘fact that it (Bharti Airtel) was using all its internal generations for expansion of network to keep up with the intense competition in the market’.

Second, TCIL had sought the listing of Bharti Hexacom, which too was turned down, ‘on the grounds that their flagship company (Bharti Airtel) is already listed and as such their policy does not permit subsidiaries being listed.’