By Allan Olingo

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Airtel Africa — a subsidiary of India’s Bharti Airtel — said last Wednesday it had raised $1.25 billion from six global investors to clear its debts.

The funds were raised from Japanese multinational holding conglomerate Group SoftBank, American private equity firm Warburg Pincus LLC and Temasek Holdings (Private) Ltd, an investment firm owned by the government of Singapore.

“The proceeds will be used to reduce Airtel Africa’s existing debt of $5 billion and for growth of its African operations.

“Airtel Africa subsequently intends to make an initial public offering and use the proceeds primarily for further reduction of debt,” the telecommunications firm said in a statement.

“This primary equity issuance clearly underlines the confidence of leading global investors in Airtel Africa’s successful business strategy and its potential to sustain growth and profitability.

“The transaction will help us further deleverage our balance sheet and boost our capacity to upgrade networks, expand coverage in different markets and achieve rapid growth of Airtel Money across our operations,” said Raghunath Mandava, chief executive officer for Africa at Bharti Airtel said.

Reducing debt

The Indian telecommunication giant, with a presence in nine African countries, said the subsequent market debut will also be used to reduce debt further but will not involve any sale of existing shares by Airtel.

The expected will cut its debt by an estimated eight per cent. With this deal, Bharti Airtel's stake in the African operations is expected to go down from 100 per cent to 71 per cent, analysts said.

Airtel Africa has seen a turnaround of its business in recent years, with this investment now demonstrating the confidence of leading global investors in the company’s ongoing robust growth and profitability, coming barely two years after its chairman Sunil Mittal hinted at selling off the African stake after a streak of losses.

Airtel Africa is experiencing a healthy revenue growth in voice and data services and also strong performance in the Airtel Money business is also posting a strong. Its financial performance continues to improve, having turned positive in terms of net profit.

In the last quarter of its 2017 financial year, the African unit posted positive profit before tax, the second of such results in its eight year operations in the continent.

In the results, the continents second largest operator saw its profit after tax for the quarter ended March this year almost triple to $154.52 million from $57.5 million over the same period the previous year.

“Africa revenues grew by 10.7 per cent year-on-year led by strong growth in data and Airtel Money transaction value.

“Mobile data traffic has grown by 88 per cent to 70 billion MB in the quarter as compared with 37 billion MBs in the corresponding quarter last year.

Data customers increased by 48 per cent, to 24.9 million from 16.9 million in the corresponding quarter last year,” Mr Mandava, said.