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Bharti Airtel in talks to merge Sri Lanka unit with Dialog Axiata

Feb 15, 2016 (LBO) - Bharti Airtel is believed to be in talks to merge its wholly-owned Sri Lanka unit with Dialog Axiata in a likely share-swap deal, two people familiar with the matter said.


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A potential Airtel Lanka-Dialog-Axiata merger is likely to be along the lines of the recent merger of Bharti Airtel and Axiata's telecom units in Bangladesh, a report by The Economic Times of India said. In this scenario, Axiata will be the dominant shareholder and Airtel a strategic minority holder in the combined entity, sources said.



Indications are Dialog Axiata may issue ordinary shares to Bharti Singapore, a wholly-owned Bharti Airtel offshore arm, akin to the model followed by Bharti and Axiata group in the ongoing merger exercise of their Bangladesh subsidiaries, one of the persons cited said.

"The negotiations are still on." Sources say one key hurdle is that the Competition Commission of Sri Lanka may have some issues with a potential Airtel Lanka-Dialog merger since Dialog Axiata already controls over half the country's mobile market. Axiata Group has an 83.32 percent controlling stake in the Colombo Stock Exchange-listed Dialog Axiata Plc while the balance shares are with the public.

"There is no development for us to report at this stage," said a Bharti spokesperson in a written response to ET's queries. The stakes are big for the Sunil Mittal-founded mobile carrier, the largest in India and among the top four globally by subscriber base.



A merger with market leader Dialog Axiata would catapult Airtel Lanka from the fourth-largest carrier spot to becoming a part of an entity which is the No 1 mobile operator in Sri Lanka. Airtel Lanka has a shade over 2 million customers, and currently trails Dialog, Mobitel and Etisalat, which are the top-three mobile operators in the island nation.

Dialog has some 10 million customers.


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Sri Lanka is also among the few countries in the world where the government has pegged a floor price mobile tariff, which market leader Dialog has matched. Accordingly, rivals cannot drop their tariffs any further.


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According to sources, this is a key reason why Airtel Lanka hasn't been able to effectively compete with Dialog and boost market share in Sri Lanka, The Economic Times reported.
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