Bharti Airtel in talks to sell its Lankan operations to Etisalat

Bharti Airtel, the world's fourth largest telecom operator by subscribers, is in advanced discussions to sell off its Sri Lankan operations to Abu Dhabi's Etisalat, said two persons aware of the development.

According to one such person, Standard Chartered Bank is advising the Indian company in the transaction. Bharti AirtelBSE -2.60 % Lanka, which has a subscriber base of 1.7 million, has been valued between $110 million and $130 million. Etisalat is Sri Lanka's third-largest operator with 4.5 million subscribers and it will move up to the second spot if the deal goes through.

Responding to a questionnaire on the sale of its operations to Etisalat, Airtel said as a policy it didn't respond to market speculations. Standard Chartered declined comment while Etisalat could not be reached for comments. Sri Lanka reportedly has an addressable mobile market of about 22 million, with penetration levels of around 85%.

"In a country like Sri Lanka, an operator has to be either the largest or the second-largest to make money," said the second person aware of the development, while explaining why the deal was important for the Abu Dhabibased operator. Airtel's growth prospects in the island nation, on the other hand, were limited as it just had 1.7 million subscribers.

The company's subscribers have not grown in the past four quarters and despite investing over $300 million since 2007, the unit continues to make losses. "The Sri Lankan operation has been a cash guzzler for Bharti,'' said the first person.

While Bharti Airtel doesn't report the financial numbers for Sri Lanka separately, sources told ET that the company had posted revenue of Rs 320 crore for the quarter ended June 2013 and a net loss of Rs 190 crore.

The company, which entered the Sri Lankan market in 2009 as the country's fifth operator, offers 2G, 3G and 3.5G services in the island nation across all the 25 districts and it has built a distributor network of 40,500 retailers.

With a small population, the Sri Lankan market turned out to be a difficult game for India's largest telecom operator whose foray had begun with stiff resistance from the local operators in 2009.

Fearing the size and scale of Airtel's operations, incumbent operators had resisted giving interconnection to it, a trouble which later resolved. Airtel's operations were later mired in controversy as it tried to launch a price war in the market, which was later thwarted by the telecom regulator for being anti-competitive. (Source: The Economic Times)