The Hindu Business Line : Bharti Airtel stock dives 5%

Mumbai, May 6 Telecom giant Bharti Airtel on Tuesday fell more than 5 per cent, on talks that the company is mulling a stake buy in South African telecom company MTN.

This is the highest fall registered by the stock since the great stock market fall of January 22 this year.

The stock opened in the green at Rs 900 and then declined to a low of Rs 840.35. The share price closed at Rs 846.60 which is Rs 47.25 lower than the previous day’s close.

On its possible acquisition of a stake in the South African company, Bharti Airtel’s statement to the exchanges said: “Current discussions (that) are still at an early stage, are exploratory in nature and may or may not lead to any transaction”. MTN has also informed the Johannesburg Stock Exchange that it was in talks with Bharti Airtel.

Balance sheet worries

This news, say analysts, has got investors anxious about how the Indian telecom major would finance the deal. Marketmen say that investors are worried Bharti would widen its balance-sheet to bid effectively for the MTN group. Other rival companies that might be interested in buying into the South African company are Vodafone Group Plc, Reliance Communications Ltd and China Mobile Communications Corp, say reports.

“There are worries that Bharti might sell a part of its own shares in order to finance the deal, which has gotten the investors in a bit of a tizzy. Until now the company has been free from debt and has a good amount of cash surplus (over Rs 5,000 crore). If it took any debt for the buy, it would be a first time debt for the company,” said a telecommunications analyst with a brokerage.

Routine decline

Analysts said a fall in share price is almost always the case before the news of any major acquisition is announced, as investors will be worried about overpayment and dilution before looking at the collaboration and the possible growth prospects.

“In the past, when the Tata Steel and Corus deal was announced the share price of the former dipped. So did Tata Motor’s share price when it announced its acquisition of Land Rover and Jaguar. The same seems to be happening to the Bharti Airtel stock price due to investor concerns regarding financing of the deal. Basically a lot of speculation is taking place regarding the deal, which might not even end up happening,” said the head of research of a stock broking firm.

On the other hand, the share price of South Africa’s MTN on Tuesday rose by 10 per cent, said agency reports.

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