By Allan Olingo

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Regional telco Tigo has sold its Rwandan business to Airtel — its third such sale this year — in a move seen as an exit strategy out of its African business and a consolidation for Airtel, whose Rwandan unit has been posting losses.

Last week, Bharti announced that it had entered into an agreement with Millicom International, the parent firm of Tigo Rwanda, to buy its 100 per cent equity, making Airtel the only other operator in that market after MTN.

Chairman of Bharti Airtel Sunil Mittal, said that they had resorted to consolidating their business through acquisitions in markets where the telcos operations are lagging due to low market share and the presence of too many operators.

“Airtel and Tigo have merged their operations to create a strong viable entity in Ghana,” said Mr Mittal. “In acquiring Tigo Rwanda, we aim to become a profitable and a strong challenger in a two-player market.”

The consolidation of the Rwandan business is subject to regulatory approvals from the competition authorities. It is understood that the transaction is worth six times the net earnings of Tigo Rwanda, and will be payable over the next two years.

But it is the sale of Millicom’s businesses in Ghana and Senegal this year that is seen as a strategic withdrawal by the South Africa-based firm.

In October, the firm entered into an equal share merger agreement with Airtel Ghana. In February, the firm sold off its Senegal business to Orange in a deal valued at $129 million. In February 2016, it sold its assets in the Democratic Republic of Congo to Orange for $160 million.

“The decision to sell in Senegal was an opportunistic move, and Millicom felt it was in a better position after its restructuring. We need to continue focusing on revenue growth and we’re well on track to get better returns for our investors,” Millicom’s Africa chief executive officer Mohamed Dabbour said in an interview with ITWeb Africa.

The firm, which has strong operations in Latin America, however said that it is only going for acquisitions and mergers in a bid to remain competitive on a continent that is saddled by too many players.

Tigo now remains with operations in Tanzania, which is one of its most lucrative African business, and Chad. It is also understood that it will be looking at selling its 22 per cent stake in the Helios Africa tower business.

Overcrowded markets

Mr Dabbour said mergers and acquisitions happening across the continent demonstrated there were too many players and that markets were overcrowded.

“If you exclude specific market leaders in the telecommunication sector in Africa, most other players are not profitable. We therefore believe that consolidation is needed in some key African markets that are very fragmented,” Mr Dabbour said, adding that the operator has worked to for instance consolidate its position in countries like Tanzania with the acquisition of Zantel two years ago.

For Airtel, the acquisition in Rwanda comes barely a week after it dispelled claims that it was seeking to exit Kenya, Tanzania and Rwanda. Mr Mittal said that they should have instead done a thorough due diligence before its 2010 purchase of the African operations from Zain.

“Our Africa investment was a bit rushed and should have been done with a little more due diligence. We have learnt our lessons over the past six years and we are sure we will turn around the remaining units into profitability soon,” said Mr Mitta.

Over the past three years, the Indian telecommunication giant has been solidifying its market position in Africa through mergers and acquisitions as it seeks to become a key player.

In Kenya, it acquired assets from Yu mobile, Uganda’s and Congo’s Warid. Airtel has also indicated that it still values the Kenyan and Tanzanian operations and will work to ensure their viability.

“We are also committed to the long term viability of our operations in Kenya and Tanzania, to ensure that in 2018 all our 15 operations in Africa start contributing positive margins and cash flows towards a healthy and profitable Airtel Africa,” said Mr Mittal.

Related stories:

• Will Airtel maintain Africa presence?
• Ownership row stands in the way of Tigo Tanzania IPO
• Bharti Airtel reviews Africa strategy amid exit fears