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In a move aimed at consolidating its position in Uganda, Bharti Airtel has announced the acquisition of Warid Telecom Uganda.
The company, which is Uganda’s third largest, will help improve Bharti’s market share from the current 22% to 39%. MTN leads the 19 million subscriber Ugandan telecom market with a share of 45%.
While Bharti Airtel has not disclosed the price paid, analysts reckon that the Indian company would have paid about $224-$280 million (Rs 1,200- Rs 1,500 crore for the acquisition if EV/subscriber metric of $80-$100 is used.
While Warid Uganda has 2.8 million subscribers, that for Bharti in this market is 4.6 million.
Four years ago, the Essar Group, which wanted to buy Warid's operations in Uganda and Congo Brazzaville but did not complete the transaction, had pegged the valuations for the two countries at $318 million.
Though the news came before the markets closed, the Street however did not react much to the news and the stock closed flat at Rs 299.45. “While the move could help Bharti increase its base in the country, the impact on revenues would not be much given Uganda fetches Bharti just about 3% of its Africa revenues,” says an analyst.
The company continues to invest in Africa as penetration at about 40% means scope for growth, average revenue per user for Bharti’s Africa business at $6.2 is much higher than similar metric for India at $3.4. Further, demand for data applications as well as mobile e-commerce is much more than in India, says an analyst.
While the company invests in Africa, its operations there continue to post losses. For the nine months ended December, the company had losses to the tune of Rs 1,724 crore, almost double that of the year ago period.
Given the correction in the stock price, most analysts (62% according to Bloomberg) have a buy rating with a price target of Rs 355, most of the value coming from the India business.
What is pulling down the sum of the parts valuations are the regulatory uncertainties (Rs 60-Rs 65 per share) and Africa business (Rs 20 per share)
