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Bharti rings into Bangladesh with Warid - Views on News from Equitymaster
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Bharti rings into Bangladesh with Warid
Jan 13, 2010

Not long ago, Bharti Airtel had an aggressive plan of forming the third largest telecom company in the world by tying up with South Africa's MTN. That deal size was pegged about US$ 23 bn. While that deal did not fructify, Bharti is at it again. But this time around it has taken a relatively much smaller step.

The company yesterday announced that its will be acquiring a 70% stake in Warid Telecom (Warid), which is Bangladesh's fourth largest telecom service provider. Warid has a subscriber base of about 2.9 m. A 70% stake in the company will give Bharti management and board control in the Bangladeshi company.

Currently, Warid is owned by the Dhabi Group. As part of the agreement, Bharti will be making a fresh investment of US$ 300 m or about Rs 13.7 bn in the company. As per the company press release, "The acquisition by Bharti Airtel would be partly by purchase of existing shares held in Warid Telecom International Limited by Dhabi Group for a nominal consideration and balance by way of issue of fresh shares a par."

As per Bharti Airtel, this new funding would be utilised for network expansion and introduction of innovative products and services. Post this US$ 300 m investment, the total amount invested in Warid Telecom would be around US$ 1 bn. The Dhabi Group would continue to hold the remaining 30% stake in Warid.

With this, India's largest telecom company has spread its wings in another region in South Asia. First of course being Sri Lanka, where it launched its services last year.

The fact that this plan has come up in short time after the whole MTN chapter does indicate that Bharti is desperate to diversify geographically outside the Indian markets that is seeing an intense price war currently. One may argue that the Indian telecom industry in itself has a long way to grow from being called a ‘matured' market. However, considering that competition is heating up in the Indian market, Bharti's plans of diversifying outside the country seems a logical decision.

Bharti has not divulged much detail of this acquisition. As such, it would be difficult for us to analyse the deal properly. We will update you on the progress of this deal and its contours once the company itself makes some details public.

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