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The country’s largest telecom player, Bharti Airtel, on Tuesday said it had no plans of exiting Africa and will continue to invest in the region, a day after it entered into a pact with France’s Orange for selling its four subsidiaries. However, according to analysts, it might exit some more countries in Africa. Airtel has operations in 17 markets there. According to sources, it is looking at a valuation of $1-1.3 billion for the four markets in Africa.
“Airtel is well positioned in the remaining countries (13) and there is significant growth upside available. We remain fully committed to our Africa operations and will continue to invest in its growth and building a profitable business and accordingly have no plan to exit,” the company said in an e-mail response.
“These countries represent a relatively small percentage of our overall Africa business. The proposed transaction along with our recent strategic divestment of towers will help us establish a sharper focus on the remaining countries, significantly reduce the debt giving a boost to our aim of achieving net profit and free cash flow in Africa,” Airtel said.
The total revenue for the four countries — Burkina Faso, Chad, Congo and Sierra Leone — was about $730 million, representing 16 per cent of overall Africa revenue, as per the year ended March. It has 8.73 million subscribers in Africa.
The four countries also accounts for 12 per cent of the total African subscribers and better performing countries in terms of revenues. Besides, Bharti is among the top two operators in each of these four markets. “Given that Bharti is planning to exit from some of its relatively better performing markets we cannot rule out the possibility of disposing some of weaker operations,” according to an analyst report by BNP Paribas
According to Bank of America Merill Lynch, though Bharti is present in Africa for the last five years, there has been no material improvement in revenue trend or operational performance. Infact, the operations have deteriorated due to adverse macro conditions in Africa and hence, Bharti has been exploring the sale of some assets. “It will be directionally positive that Bharti is looking to exit these markets.”
“The potential buyers may be interested in cherry picking the more profitable assets and there preference would be skewed towards Franco markets rather than Anglo markets or Nigeria. Any potential sell off in these profitable assets will increase the African losses for Bharti,” the note added.
On Monday, Orange and Bharti Airtel International (Netherlands) announced they have tied up to explore the possible acquisition by Orange of Airtel’s subsidiaries in Burkina Faso, Chad, Congo Brazzaville and Sierra Leone. However, there is no certainty of any binding agreement as a result of these discussions.
It acquired Zain Telecom assets in Africa in 2010 at about $10.7 billion, one of the largest acquisition by Indian telco. Earlier this month, Airtel completed sale of mobile towers in five countries in Africa for $1.3 billion to cut its debt. It is also in the process of selling tower assets in six other countries in Africa. It is divesting 15,000 towers to different companies in 13 countries in Africa.
Airtel’s Africa business is running into losses since it entered there in 2010. For the quarter ended March, revenue from Africa declined 13 per cent year-on-year while net loss widened to $183 million. Net debt at the end of FY15 was $10.67 billion.
The stock ended the day at Rs 445.25, up 3.68 per cent from its previous close on the BSE.
