Singtel’s cash flows to benefit from Bharti Telecom stake sale agreement: report

The sale will help SingTel to fund its growth with less external borrowing.

Singapore Telecommunications Limited (Singtel) will see benefits in its cash flow and leverage after it inked an agreement with India-based telecommunications firm, Bharti Telecom Limited (BTL), for sale of shares, Moody’s, revealed in its report.

Moody’s was reacting to the announcement of Singtel that BTL agreed on the sale of 198 million shares, which represents 3.3% of its direct stake in Bharti Airtel Limited for a consideration of $2.25b.

The partial divestment of the stake in Bharti Airtel forms part of Singtel Group’s overall capital recycling strategy and sale proceeds will boost the growth of capital expenditure, mainly for 5G networks and cut debt.

“The sale will help the company to fund its growth with less reliance on external borrowing, such that its leverage remains at 2.2x-2.3x, below our threshold of 2.6x for the A1 rating,” read Moody’s analysis.

Moody’s said it “does not rule out special dividends being paid out of the sale proceeds, given precedence of such payments, most recently from the divestment of NetlLink Trust.” 

Singtel's management, however, maintained that “under their capital management framework, dividends will be funded from operational cash flows,” said Moody’s.