21/07/2015 4:38 PM IST | Updated 15/07/2016 8:25 AM IST

Bharti-Orange Talks: Investors Cheer Possible Deal

TONY KARUMBA via Getty Images
TO GO WITH AFP STORY BY OTTO BAKANO A man with his phone in hand walks past a window branded in an 'Airtel' logo on May 20, 2011 in the Kenyan capital, Nairobi. India will seek to expand its economic footprint in Africa, where its rival China has made major inroads, at the second India-Africa summit next week in Addis Ababa. India's Bharti Airtel -- the world's fifth largest mobile phone company -- acquired the 16-African country unit of Kuwaiti telecom firm, Zain at a cost of $10.7 billion in 2010 when India's imports from Africa were worth $20.7 billion and its exports stood at $10.3 the same year even though China's trade with Africa remains far heftier. AFP PHOTO/Tony KARUMBA (Photo credit should read TONY KARUMBA/AFP/Getty Images)

Shareholders have cheered Bharti Airtel's talks with Paris-based Orange SA to sell four of its telecom operations in Africa. The stock surged to a six-year high Tuesday — climbing 5 percent in morning trading — before settling to 3.62 percent at 4 pm. Bharti Airtel stock has risen 28 percent in 2015, beating the BSE Sensex that advanced 3.5 percent in the same period.

Airtel, which operates in 17 African countries, had paid $9 billion to buy these operations — located in Burkina Faso, Chad, Republic of Congo and Sierra Leone — from Kuwait-based Zain in 2010. Five years down, they continue to be a drag on Airtel's profits and on Monday, the company said that it was exploring selling them.

Orange might pay between $680 million to $1.4 billion, according to a note by Bank of America Merrill Lynch. Earlier this month, Airtel, controlled by billionaire Sunil Mittal, sold its phone-tower operating business in five African countries for more than $1.3 billion.

Such deals will help the company pare its massive debt that stands at $10.5 billion this fiscal that includes the huge amount it paid in the spectrum auctions earlier this year.

The company's Africa operations were also hit by adverse macro conditions and it has struggled to turn a profit in the region, since it acquired Zain's loss-making assets five years ago. If the sale to Orange goes through, Airtel's stock might be up for a better rating. For Orange, it would be an opportunity to expand in Africa, where it currently operates in 19 markets.

Like Us On Facebook |
Follow Us On Twitter |
Contact HuffPost India

More On This Topic