Airtel's fund raise to fortify competitive position and give ammo for 5G: Analysts

Fund raising of Bharti Airtel is expected to strengthen its competitive positioning in the market and provide the telco with the necessary ammunition for aggressive 5G rollout, analysts said. Though the announcement was unexpected and surprising , would enable the telco to enhance its market share and provide wherewithal to make faster investment in a scenario where the country could move into a two-player market earlier than expected, analysts added.

Bharti Airtel’s board on Sunday approved raising up to Rs 21,000 crore by way of rights issue at a price of Rs 535 per share.

Increased cash to increase market share

The fund raise by Airtel although was not necessary at this juncture, but it does provide Bharti with the necessary ammunition in case of aggressive 5G rollout, Edelweiss report said.

Despite 3 times the  net-debt to EBITDA, Bharti’s balance sheet was well funded, considering rising EBITDA due to market share gains and FCF (free Cash flow) generation. Reliance Jio’s  stronger balance sheet, related capex and impending 5G spectrum auction may have prompted Bharti to raise funds and we see it positively, Edelweiss said in its report.

BofA Securities believes that Bharti management also subscribing to unsubscribed portion sends a strong signal. The increased cash would help Bharti to further increase its market share as it would be able to invest in its network or branding and distribution, BofA Securities report said.

UBS in its report said that, a strong balance sheet would also position the company well to benefit from a potential VIL bankruptcy, which could lead to an influx of more than 100 million customers and create need for additional spectrum and capex.

It is of the view that Airtel’s rights issue is mainly aimed at shoring up the balance sheet for 5G investments, including spectrum auction, which is likely within FY2022, UBS said.