Airtel Africa sets share price ahead of London Stock Exchange listing

Tuesday June 25 2019

Airtel Africa intends to issue an initial public offering of 595.2 million for 744 million new shares on the LSE.

Airtel Africa intends to issue an initial public offering of 595.2 million for 744 million new shares on the LSE. PHOTO | FILE | NATION MEDIA GROUP 

KENNEDY SENELWA
By KENNEDY SENELWA
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Airtel Africa has set a price range of $1 to $1.25 per share for its planned listing on London Stock Exchange.

The company intends to issue an initial public offering of 595.2 million for 744 million new shares on the LSE — about 25 per cent — to raise gross proceeds of $750 million including an over-allotment option.

The IPO’s final pricing is expected on June 28, with conditional dealings in shares commencing on the same day on the LSE; equities are expected to start trading on July 3.

Airtel Africa said the price range for ordinary share implies market capitalisation of between $3,788 million and $4,565 million.

“Excluding the over-allotment option, the offer is expected to comprise 541.1 million to 676.4 million shares, to raise gross proceeds of approximately $682 million,” said the company in filings to the LSE.

NIGERIA STOCK EXCHANGE

In its prospectus, the firm disclosed its intention to list on the Nigerian Stock Exchange concurrently with the IPO. This will be subject to approvals by the Nigerian Securities and Exchange Commission and the Nigerian Stock Exchange.

Airtel Africa, which operates in 14 countries, including Kenya, Uganda, Rwanda, Tanzania, Malawi, Nigeria and Democratic Republic of Congo, is the second-largest telecommunications firm on the continent after MTN of South Africa.

The telco is set to sell its shares to Nigerian investors at between N363 ($1.01) and N454 ($1.26) per share.

The company, in an offer prospectus released in Lagos, said the shareholders’ offer was part of its global effort to raise $750 million. It said the shares would be offered to high net worth investors and institutional investors through book building.

The company plans to offer 501.125 million and 716.406 million shares to Nigerians.

Airtel Africa, a subsidiary of Bharti Airtel Ltd of India, wants to proceed with the IPO to raise money to reduce its debt portfolio, and expand the provision of data and mobile money services in 14 African countries.

LISTING

Prior to admission of shares on the LSE, the firm will be re-registered as a public company limited by shares, and renamed Airtel Africa Plc. The company turned a $450 million profit for the financial period ended March 31, 2019, from a loss of $769 million in 2017, ending a loss-making streak.

“Our efficient business model makes us well positioned to capture growth opportunities across our markets, in voice, data and mobile money,’’ said Airtel Africa CEO Raghunath Mandava.

He said the firm will offer institutional investors an opportunity to participate in some of the fastest growing telecom and payment markets in the world through the IPO.

The company has engaged J.P. Morgan Securities Plc as the sole sponsor for the LSE offer. BofA Merrill Lynch, Citigroup and J.P. Morgan Cazenove will act as joint global co-ordinators and bookrunners.

Absa Group Ltd, Barclays Bank Plc, BNP Paribas, Goldman Sachs International, HSBC Bank Plc and Standard Bank of South Africa Ltd have been engaged as joint bookrunners.

For the Nigeria offer, Airtel Africa has engaged Barclays Securities Nigeria Ltd and Quantum Zenith Capital & Investments Ltd as the joint issuing house. Greenwich Securities Ltd and Chapel Hill Denham Advisory Ltd are receiving agents.

In preparation for listing, Airtel Africa issued a pre-IPO of 841.9 million shares to Warburg Pincus Parties, Temasek Holdings Private Ltd, Singapore Telecommunications Ltd and SoftBank Group International for $1.25 billion, completed in October 2018.

On January 30, the firm raised $200 million from the Qatar Investment Authority by issuing a further 134.7 million in pre-IPO subscription shares.

Airtel Africa operates in a capital-intensive industry. Telcos require substantial amounts of capital and other long term expenditures including those relating to the development and acquisition of new networks and the expansion or improvement of existing networks.

FUNDS

Airtel Africa’s capital expenditure was $630 million or the year ended March 31, 2019, $411 million for the same period in 2018 and $395 million in 2017. Capital expenditure was funded from internal revenue and external funds.

“There has been an increase in non-conventional and over-the-top players — Internet-based alternatives to traditional telephony services — such as social networking sites and messaging applications,” said Airtel Africa.

“This poses a threat to traditional telecommunications revenue streams, such as prepaid mobile voice services, which have historically comprised a significant part of the firm’s revenue,” the company added.

The ability of telcos to retain and attract subscribers or provide an attractive alternative to traditional subscriber models could affect Airtel Africa’s profitability, results of operations and financial condition.

Mobile money services expose Airtel Africa to risk of fraud and money laundering, imposition of fines and other penalties, and potential reputational damage due to misconduct or collusion by the firm’s partners or agents.

Incidents of cash control fraud in 2018, identified in Airtel Money operations in Kenya and Niger, involved circumvention of controls by employees, resulting in losses of $6.7 million and $670,000 respectively.

Airtel Africa has introduced enhanced controls including increased segregation of duties, daily reconciliations and technical restrictions on the transfer of funds to non-Airtel bank accounts to reduce the risk of fraudulent activity.

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