Sale of Africa towers, as indicated in unauthenticated media reports this week, would mean a direct upside of Rs 12-18 to our fair value for Bharti Airtel shares. Indirect benefits deriving from reduced leverage are difficult to quantify and we do not attempt to do so. We do note that a tower transaction of this scale (15,000+ towers) has never happened in the African market; in addition, the fact that the tower assets have still not been demerged from most of the opcos in Africa makes any call on timing of such a deal very tricky.
Unauthenticated media reports suggest that Bharti Airtel is looking to sell its towers in Africa ? 15,000 of them ? for US$1.8 billion. Reports also suggest Bharti Airtel has received interest from four players for buyout of these towers.
We note that there have been several media reports in the past few years with some even talking about Bharti Infratel buying these towers out from Bharti Africa. Bharti Infratel, in some of its recent Street interactions, has ruled out such a possibility.
We keep our assessment simple and present scenarios using two assumptions ? deal transaction value and likely deal EV/Ebitda.
Knowing these two, one can deduce the transaction?s (negative) impact on Bharti Africa Ebitda. Revised Africa EV would be equal to the sum of transaction EV and revised wireless business EV. Our math yields potential value accretion of R12- 18 per share for Bharti Airtel, if a transaction happen.
Kotak Institutional Equities
