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Bharti Airtel won't buy back Vodafone's 4.4% stake

By The Rainbow

India's Bharti Airtel has no intention of buying out the 4.4 per cent stake held in the company by rival mobile network, Vodafone, cellular-news reported on Sunday.

'We have no intention (of a buyback),' Mittal told reporters after the company's annual general meeting, when asked whether the company would buy back its shares owned by Vodafone.

New licensing rules say that no investor other than the government, banks and financial institutions, that own 10 per cent or more in a mobile network will be allowed to own a stake in any other mobile network.

Mobile networks had previously been allowed to own up to 9.9 per cent  in another mobile network. The other rule change blocks one mobile network from owning a stake in another that operates in the same regions of the country.

Both rules require Vodafone to sell its 4.4 per cent stake in Bharti Airtel - which has been valued at around $1bn.

Vodafone bought its stake in Bharti Airtel back in October 2005, when it brought an indirect 4.39 per cent stake in Bharti Airtel through Bharti Enterprises Private and a 5.61per cent direct stake from private equity firm Warburg Pincus LLC, giving it a 10 per cent stake in the company for $1.5bn.

Vodafone then reduced its holding by selling the direct stake to the Bharti Group for US$1.6bn after it brought a controlling stake in rival operator, Hutchison Essar in 2007.

Back in December 2009, the company said that it was looking to sell the remaining stake, and was looking for $2bn for it. The stake is worth less now due to the industry wide decline in valuations, and recent dilution of Bharti Airtel's stock.

Nonetheless, the company is likely to book a profit of $1.1bn on the original investment

This, he added, was now changing as the operators were seeing the need to consider not only the safety of the funds but the yield and diversification.