Bharti Airtel shares fall as CEO sells holding

NEW DELHI Thu Mar 12, 2009 4:08pm IST

Manoj Kohli, CEO and joint managing director, poses during a news conference in New Delhi in this August 3, 2006 file photo. Shares in Bharti Airtel fell as much as 6 percent on Thursday after the leading Indian telecom firm's chief executive sold his holding in the company. REURERS/Kamal Kishore

Manoj Kohli, CEO and joint managing director, poses during a news conference in New Delhi in this August 3, 2006 file photo. Shares in Bharti Airtel fell as much as 6 percent on Thursday after the leading Indian telecom firm's chief executive sold his holding in the company. REURERS/Kamal Kishore

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NEW DELHI (Reuters) - Shares in Bharti Airtel fell as much as 6 percent on Thursday after the leading Indian telecom firm's chief executive sold his holding in the company.

Manoj Kohli, who sold 123,000 shares through open market transactions in two tranches on March 6 and 9, later said he had done so for personal reasons. Kohli said he still held 180,000 options and would continue as CEO and joint managing director.

Bharti Airtel shares, which have more than 6 percent weight in the main index, closed down 6.4 percent at 550.3 rupees in a Mumbai market that was up 2.7 percent. It was the steepest fall for the stock in four months.

Kohli would have got about $1.5 million for the shares he sold, but his holding represented only 0.006 percent of Bharti's equity and he was not a founding member of the company, but investor remained concerned.

"The market is worried why all of a sudden the CEO had to sell his holding," said R.K. Gupta, managing director at Taurus Asset Management.

He said investors were jittery about such insider stake sales after recent corporate scandals, including the alleged fraud at outsourcer Satyam Computer.

"So nobody wants to take a risk. And we see Bharti stock remaining under pressure. The recent TRAI announcement to cut interconnection charges is also negative for them," Gupta said.

TERMINATION CHARGE IMPACT

The Telecom Regulatory Authority of India (TRAI) said on Monday it would reduce by a third from April 1 the termination charge telecoms firms pay each other for domestic calls to 20 paise a minute (less than half a U.S. cent) from 30 paise earlier.

The firm from which a call originates pays a termination charge to the called network and call rates are expected to fall after the reduction in the termination charge.

Bharti, which had 91.11 million mobile users at end-February, is a net recipient of interconnect revenues and lower termination charges would hit its gross revenue for the year ending March 2010 by 4 percent and per-share earnings (EPS) by 1 percent, Macquarie Securities estimates, assuming no tariff cut.

If Bharti decides to cut outgoing calls tariff in a manner that it retains half the benefit of the lower termination charge and the remaining is passed to the consumer, the negative impact on gross revenue would be about 8 percent and EPS would be hit by 11 percent, Macquarie said.

Still, Macquarie analysts led by Shubham Majumdar retained their "outperform" rating on the Bharti stock.

"Review of the termination charge does add to the risk, but we believe that the market is already factoring in worst case outcomes," they wrote in a note.

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