The Tanzanian unit of Indian telecommunications giant, Bharti Airtel, which has submitted its prospectus to the capital markets regulator for a possible listing at the Dar es Salaam Stock Exchange (DSE), is technically insolvent.
Airtel Tanzania’s liabilities now exceed its assets.
Last year, Tanzania’s second largest telecommunications firm posted a loss of $56.4 million, with liabilities of $665.8 million against assets of $299.5 million.
The firm now expects to raise $11.02 million through an IPO, which is way below the $291 million its main competitor Vodacom managed to raise last month, which saw South African pension fund pic buy shares worth $80 million.
“Airtel’s misfortunes in the region is that it has changed hands almost three times over the past 15 years which has seen it impact negatively on its subsidiaries balance sheet.
“What we have seen is that with each acquisition, there is new capital injection, which increases the firm’s debt levels outside of the inherited debts.
“I am certain that the Tanzanian unit are now repaying quite a bit to the parent firm in Delhi from the various capital injections it has been receiving,” an analyst told The EastAfrican.
Find its footing
According to its results, the firm paid the Tanzanian government $655,779 in taxes, $51.6 million being capital expenditure. Airtel Tanzania’s net asset value (NAV) is currently estimated at around $44.17 million.
Its financial report for last year shows that the regional units, are bleeding funds, which saw its Kenyan, Rwandan and Tanzania units post a combined loss of $181.2 million, even as only their Ugandan unit returned a profit of $44.9 million.
The annual financial report, which The EastAfrican has seen, has for the first time made public the company’s financial wellbeing, showing that the telecommunications firm is still struggling to find its footing in the region, where Vodacom has now become a dominant player.
The Kenyan unit posted a $79.4 million loss last year, after its last years current liabilities of $527.9 million exceeded its current assets of $92.6 million. The Kenyan firm ended the year with a total debt load of $429.62 million.
“These conditions give rise to a material uncertainty, which may cast significant doubt on the company’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge liabilities in the normal course of business,” says a note by its auditors Ernst & Young accompanying the statements.
Airtel Kenya’s shareholder loans also rose to $358.9 million last year, up from $299.7 million in 2015, accounting for 68 per cent of the company’s total current liabilities. It also saw its revenues shrink marginally to $161.5 million in 2016 from $169.2 million the previous year.
This performance is a pale shadow of one of its fiercest competitors and Kenyan telecommunications market leader, Safaricom, which posted $2.03 billion in total revenues and a $462.4 million in profit after tax for the year to March 2017.
The Rwandan unit saw a loss of $44.4 million even as the auditors cast doubt on its financial health, noting that it was also a going concern. It saw its revenues increase to $21.69 million last year, up from $19.9 million.
However, it is the operating expenses and currency losses of $40.4 million that pushed it to negative territory.
“The operations of the company continue to heavily depend heavily on the sources of financing from its direct and indirect parent company sources.
“However, the management is banking on raising money from meeting the projected operations targets, third parties and shareholders to boost its position. The directors remain confident that these sources of funding will come through,” the auditors said in the opinion of the Rwandan unit.
“Last year, the Kigali unit also obtained a shareholder loan of $26 million from its parent firm in India, which will be pegged at zero interest, with no repayment date.
This pushes its total shareholder loan balance to $182.4 million. It also has $3.24 million in bank overdrafts with Access Bank and Eco Bank Rwanda, with the former charging it an interest rate of 12.5 per cent.
In Uganda, the Indian teleco’s books were positive, buoyed by its rising market share, even as its competitor MTN controls 54.7 per cent of the market. Its $44.9 million profit was buoyed by the rising revenues that stood at $283.4 million, up from $232.1 million.
The Kampala headquartered subsidiary, however, saw its operating expenses rise to $189.74 million, up from $165.8 million in 2015.
Last year, it reduced its finance cost by two-thirds to settle at $20.8 million, up from $63.9 million. The Ugandan Revenue Authority earned $16.7 million from the firm as tax.
“The continuous growth in profits has resulted in the independent stability of the company. This affirms the company ability to run its operations as a going concern,” the auditors said of the Ugandan unit.
Its mobile money division returned a revenue of $35.2 million last year, up from $18.9 million, a sign of positive growth and uptake of its service that is meant to compete with Vodacom’s Mpesa.
With regards to its African operations, Bharti Airtel notated that the performance of its African operation was sluggish, having been negatively affected by currency fluctuations across key markets including Nigeria.
However, it noted that the African operations has for the first time since starting its operations in the continent posted positive profit before tax last year.
“We are now committed to turning around the Africa operations, through war on waste so as to drive down operational expenditure. We have done this through the sale and leaseback of the tower operations,” Bharti Airtel said.