Will Airtel maintain Africa presence?
Tuesday December 19 2017
Ashish Mathur, head of commercial at Airtel Business explains the firm’s internet network plan for the Kenyan coast. The company is pursuing a consolidation plan, after posting losses in the region’s markets. PHOTO FILE | NATION
Indian telecommunications giant Bharti Airtel announced a profit of $92 million from its Africa business in the second quarter ended September 2017, amid reports that it was planning to exit the East African market.
India’s Economic Times quoted Bharti Airtel chairman Sunil Mittal as saying that they were planning to exit the Kenyan, Tanzanian and Rwanda markets and were exploring a mix of acquisitions and mergers. The company later revised that position, ruling out exit but retaining the consolidation plan.
“We are open to consolidation opportunities either through acquisitions or mergers to create a viable business in Kenya, Rwanda and Tanzania. It was never said that we were looking at an exiting these markets,” Airtel said in a statement last week.
The telco has registered marginal growth of 2.6 per cent in revenues to $782 million in the second quarter of 2017, from $762 million in the corresponding quarter last year, suggesting that its fortunes on the continent were improving.
The company was involved in the acquisition of yuMobile in Kenya and Milicom in Ghana, aiming to become the market leader where it operates.
Airtel recently increased its assets in Uganda and Kenya. In 2015, it took up Yu’s 2.7 million subscribers while earlier in 2013, it bought Warid Telecom in Uganda and the Congo Republic.
READ: Bharti Airtel reviews Africa strategy amid exit fears
Losses
Its East African subsidiaries’ financial reports for the past year show that with the exception of Uganda, they have made losses. The Kenyan, Rwandan and Tanzania units posted a combined loss of $181.2 million, while Uganda returned a profit of $44.9 million.
The three units are technically insolvent, as their liabilities exceed their assets. Airtel Kenya, for instance, ended last year with a debt of $429.62 million. The Tanzanian unit had liabilities of $665.8 million, and Rwanda $185.4 million.
Early this year, Mr Mittal admitted that their Africa business has not been a success. Airtel has exited several markets in West Africa, either through sell-offs or mergers as it sought to reduce its debt burden.
READ: Bharti Airtel’s regional units post $181.2 million in losses
Change of strategy
“Our operations in the 15 African countries have not been successful, and we now need a change of strategy. We have already taken $1 billion from sales in two countries and $2 billion out of towers. This means that $3 billion has come back, so some more rationalisation may be possible,” Mr Mittal said.
The Africa operations returned to profitability in 2016 despite being negatively affected by currency fluctuations across key countries like Nigeria, its biggest and profitable market on the continent.
The firm saw its net income bounce back to $48 million in the year to September, compared with a loss of $91 million in the corresponding quarter last year.
Its capital expenditure during the quarter was $50 million for African operations, while its operating free cash flow rose to $201 million, as compared with $74 million in the corresponding quarter last year.
“We are committed to turning around the Africa operations by driving down operational expenditure through the sale and lease-back of towers,” the telco says.
Growth
It adds that its focus on acquiring “quality customers” has resulted in a lower customer churn rate for the quarter — at 4.9 per cent, compared with 5.3 per cent in the corresponding quarter last year.
“As of September 30, we had an aggregate customer base of 81.9 million, compared with 78.1 million in the corresponding quarter last year, an increase of 4.8 per cent,” it said in its financial report.
It recorded the biggest growth in the data business, with customers increasing by 20.1 per cent to 21.7 million during the quarter, compared with 18.1 million in the corresponding quarter last year.
Data customers now represent 26.5 per cent of the total customer base, compared with 23.1 per cent last year.
“The total megabytes on the network grew at a healthy rate of 83.8 per cent to 63 billion, compared with 34.3 billion in the corresponding quarter last year. Data usage per customer during the quarter was at 1,018MBs, compared with 670MBs in the corresponding quarter last year, an increase of 51.9 per cent,” it said.
The money transfer service, Airtel Money, recorded a marginal increase in customer base of 3.5 per cent to 9.5 million, against 9.1 million over the same period last year.
The total value of transactions on the Airtel Money platform grew by 31.1 per cent to $4.85 billion in the current quarter, compared with $3.7 billion in September 2016.
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