Bharti Airtel Squeezes Abu Dhabi’s Sheikh Mabarak Al Nahayan out of Warid Telecom

Bharti Airtel’s intention to takeover Bangladesh’s Warid Telecom is finally confirmed. Time for some self-praise – I was very close in valuing Warid Telecom setting aside the hype created by India’s leading financial daily and all other Web 2.0 folks 🙂 Bharti Airtel has informed,

Bharti will invest ~USD 300 mn in Warid, which will be utilized towards network expansion and introduction of new products and services. The acquisition will be partly by purchase of existingshares in Warid held by the Dhabi Group, for a nominal consideration (not disclosed by management) and the balance by way of issue of fresh shares. BHARTI will have management and board control of Warid.

In my opinion this is not an attractive investment / market for Airtel, in the near to medium term for the following reasons

• Warid suffers from a spectrum disadvantage given its spectrum allocation at 1800MHz, which impacts its longer term capital efficiency.
• Current mobile penetration is 30% in Bangladesh, the upside is limited, as 45% of the Bangladesh population lives below the poverty line. Hence the effective penetration in our view is 58% and I think operators will find it tough to expand the market beyond 70m subscribers
• Finally, contribution from Bangladesh would not make meaningful impact on Bharti’s financials this year or until 2012

I am on hectic travel schedule and hence may not update here for couple of more days. However, would love to write a lot on 3G, maybe next week.