Airtel Tanzania losses narrowed to $15.94 million last year from $47.1 million in 2017, the telecommunication firm’s financials have revealed.
Despite the improved performance, the loss increased Airtel’s accumulated losses in Tanzania to $436.6 million.
The company’s revenues dipped to $202.6 million in 2018, from $212.9 million the previous year, its annual report shows.
The Dar unit’s current assets now stand at $211.8 million, while its liabilities add up to $625.7 million, leaving the telco in deep net negative assets territory.
The Airtel Tanzania results mean Bharti Africa’s units in Kenya, Rwanda and now Dar made $46.5 million losses last year, as the Indian telecommunication giant still struggles to crack a market controlled by UK giant Vodafone and its subsidiaries.
The Ugandan unit emerged as the only profitable business for the telecommunications multinational within East African in 2018.
The Kenyan unit posted a $27.43 million loss last year, down from $59.5 million loss in 2017, while the Rwandan unit saw its loss widen ten times to $3.16 million last year, barely a year after it bought out Tigo from the Rwandan market, having booked a tax loss of $3.32 million.
The Ugandan unit saw its profits grow by almost 30 per cent to $90.5 million from $65.6 million. The performance of the regional units shows that the firm is still struggling to find a foothold in the region, even as it keeps these units afloat through borrowings.
The Dar loss leaves it exposed, as its liabilities exceeds its assets under the face of stiff competition from market leader Vodacom.
Airtel Tanzania saw its Airtime revenue drop significantly from $82.26 million in 2017 to $64.74 million last year, while its value added services grew to $90.43 million, up from $72.8 million.
Its cost of sales dropped to $48.9 million as at December last year, up from $58.23 million the previous year, in what the management attributed to ‘near-halving in local interconnection rates.’
The Dar units poor show comes barely three months after it emerged that Dar had quietly waived listing requirements for the country’s second-largest telecommunications firm Airtel, as part of settlement arrangements.
“In June 2019, pursuant to settlement arrangements agreed with the Government of Tanzania, Airtel Tanzania will receive a waiver from the listing requirements,” Airtel Africa said in the prospectus.
In 2016, Tanzania demanded that telecommunication firms offer at least 25 per cent of total share capital on the Dar es Salaam Stock Exchange by no later than 31 December 2016.
Airtel Africa argued that it wasn’t able to meet this requirement as a result of various factors, including the potentially insufficient liquidity in the Tanzanian economy, due to a potential lack of investors with sufficient capital to subscribe for the shares, market conditions in the industry in which it operates, economic and political conditions in Tanzania.
“To the Group’s (Airtel Africa) knowledge, neither the Tanzania Capital Markets and Securities Authority nor the Tanzania Communications Regulatory Authority (TCRA) has taken any action against a license holder for failing to comply nor has any action been taken against a telecommunications company for failure to comply with the Communications Act of 2016,” the firm said.
However, Airtel Africa admits that should it fail to comply in a timely manner with the requirement to complete a local listing and/or obtain a minimum local shareholding in Tanzania, it could be subject to fines, penalties (including criminal penalties), litigation and other enforcement actions, which could have a material adverse effect on its business, results of operations, financial condition and prospects.
The telco is now expected to undergo restructuring as part of the deal struck with President John Magufuli’s administration.
Part of the agreement will see Airtel Tanzania granted a one-time tax clearance certificate for all historical tax claims for the period up to December 2018, such that it will not become subject to any new tax assessments, claims or demands by Tanzania, subject to verification and consideration of the records by the Tanzania Revenue Authority.
Airtel Tanzania’s tax loss balance recorded in Airtel Tanzania’s corporate tax returns for the financial year ended 2017 will also now be allowed to be carried forward, with the tax claims and the TCRA fines treated as settled without any liability.
The two sides agreed that such settlement shall not be construed as an admission of fact or law or as a concession or admission of wrongdoing, obligation or liability, and Airtel Tanzania will not be subject to any tax liability arising in connection with the transactions contemplated by the Settlement Agreements.
The deal will also now see Airtel Tanzania make a payment of $26.01 million split into a period of 60 months (payments having commenced from April 2019) for the provision of support services by Tanzania to Airtel Tanzania.
The firm and Dar will also now co-operate in the completion of the sale of towers owned by Airtel Tanzania, and the proceeds distributed in a predefined manner towards repayment of the shareholder loans to be retained in Airtel Tanzania, with the balance to be distributed as a special, one-time payment to Tanzania.
In March 2018, Tanzania raised tax claims of $874 million against Bharti Airtel relating to capital gains on transfers of ownership of Airtel Tanzania in 2005 and in 2010; and also raised various tax claims against Airtel Tanzania totalling $47 million as at March 2019. Airtel Tanzania was fined $183 million.