Airtel Africa is reeling under a $3.12 billion debt that is impacting its capacity to fund its operations in 14 countries across the continent, as competition increases across the telecommunications landscape.
The telco, which is listed on the London Stock Exchange, revealed in its unaudited financial statements for the six months to September 30 that a significant amount of cash that it generates from trading activities, including proceeds from sale of assets and fresh capital injection from equity investors, goes towards repaying the debt.
The telco, a subsidiary of India’s telecom giant Bharti Airtel, is reviewing its mobile money business on the continent with a view to listing it on the stock exchange.
The company also hopes to wrest market share from rival firms such as MTN, Vodacom and Orange through competitive pricing, network expansion and modernisation.
The latest policy shift comes after three investors — Qatar Investment Authority (QIA), The Rise Fund and Mastercard — signed agreements to inject $500million into Airtel Mobile Commerce BV (AMC BV), the holding company for several of Airtel Africa's mobile money operations, in exchange for minority shareholding.
Airtel Africa has so far received $375 million from the investors. The remaining proceeds from the three investors, amounting to $125 million, will be received upon completion of the second close.
QIA ultimately intends to own and operate the mobile money businesses across the 14 countries Airtel Africa is in.
The funding was boosted by a gain of $4 million on the sale of 162 telecommunication towers in one of Rwanda’s subsidiaries for a consideration of $10 million.
The telco said the fresh funding will be used to reduce the group’s debt, and invest in network and sales infrastructure in the respective operating countries including Kenya, Uganda, Rwanda and Tanzania.
“Mobile money continues to be one of our fastest growing service segments, an increasingly important part of our business. The Group has continued to drive financial inclusion across its footprint,” the Company’s said in its annual report for this year. “Price and transparency are vital elements of our offer: simple, understandable pricing plans based on the principle of ‘more for more’, in a strategy that is tailored to each market.”
Airtel Africa had 122.7 million subscribers, and 23.9 million mobile money users as at September 30, 2021.
Disposal of tower assets
The Group is also in the process of disposing 1,400 telecommunications tower assets and related liabilities in Tanzania at a consideration of $175 million, as well as a subsidiary holding 735 towers in Malawi.
The proceeds of the transactions are expected to also go towards repaying the Group’s debt.
“The low penetration of traditional banking services across our footprint leaves a large number of unbanked customers whose needs can be largely fulfilled through mobile money services,” the company said.
“We aim to drive the uptake of Airtel Money services in all our markets, harnessing the ability of our profitable mobile money business model to enhance financial inclusion in some of the most 'unbanked' populations in the world.”
Last month, Airtel Money announced a new partnership with African payments company Flutterwave, to expand services to businesses across East Africa.
The partnership enables businesses integrating Flutterwave in Uganda, Tanzania, Zambia, Malawi, Kenya and Rwanda to receive payments from customers, as well as make bulk payments into Airtel Money wallets thanks to it's proprietary fintech platforms
In July this year, Airtel Africa signed agreements with Qatar Holding LLC, an affiliate of the Qatar Investment Authority (QIA), to invest $200million in Airtel Mobile Commerce BV (AMC BV).
This agreement followed earlier similar announcements of investments of $200 million by TPG's The Rise Fund, and $100 million by Mastercard, made on March 18, 2021 and April 1, 2021, respectively.
Profit after tax
The Group’s profit after tax for the six months to September 30, 2021 rose to $335 million from $145 million, with revenues from mobile money services increasing by 43 percent to $259 million, from $181 million in the same period.
Voice revenue increased to $1.14 billion from $972 million, and data revenue rose to $733 million from $548 million during the period under review.
The Group’s net debt reduced to $3.12 billion from $3.45 billion.
“The risks from Covid still remain, with sub-Saharan Africa continuing to experience a third wave of the pandemic. Governments continue to implement balanced measures of lockdowns and restrictions accordingly.
“But vaccination levels remain low, and we continue to monitor the situation for potential impacts on economies” said Segun Ogunsanya, the Group’s CEO.
Airtel Africa is a key provider of telecommunications and mobile money services, with a presence in East Africa, central and West Africa.
The Company offers an integrated suite of telecommunications solutions to its subscribers, including voice, data services as well as mobile money services both nationally and internationally.