Airtel Nigeria Operations: How Profit Falls Will Affect Business In 15 African Countries

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Since entering the African continent in 2010, Airtel Africa is yet to make a profit and is currently seeking to improve its operations in Africa.

This week, India’s No. 1 telecom operator, Bharti Airtel’s shares fell by nearly 4 percent after the company reported its lowest profit in four years. The company’s shares at NSE declined by 3.63 percent.

The company is reportedly considering mergers or stake sales at some of its African assets, especially in those markets where it was not in the top two positions, in an attempt to cut its $12 billion debt pile and turn the African operations profitable.

Airtel is also looking to raise funds by selling stake in its tower unit, Bharti Infratel, via a bond issue, besides exploring consolidation possibilities in Africa.

Airtel Nigeria About To Crash Prices Of Data Plans

Already, Airtel Africa has sold its Sierra Leone and Burkina Faso operations to France’s Orange Telecom, as well as some of its tower businesses, as it reorganizes assets.

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At the World Economic Forum in Davos, Switzerland, Chairman, Bharti Airtel Ltd, Sunil Bharti Mittal, expressed fears that resultant job cuts at various levels and shrinking of businesses in countries of operations on the continent could be seen.

Mittal said some of the firm’s businesses in 15 African nations would be affected. The countries include; Chad, Democratic Republic of the Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Rwanda, Seychelles, Tanzania, Uganda and Zambia.

Mittal further said that the cut in operations in the continent could be completed within a year. Faced with an escalating price war in its home market, Bharti is looking for ways to pare net debt equivalent to about $12 billion as of September.

The Bharti Chairman disclosed that a committee was studying whether the sale would be a minority stake or control of the tower unit, adding that a decision could be taken in a month.

In October, Bharti said in a stock exchange filing that it had formed a committee to evaluate options for its 73.5 per cent stake in Bharti Infratel.

For the July-September quarter, Airtel’s Africa operations recorded a net loss of $91 million from $170 million a year earlier.

However, the Airtel Africa’s revenue climbed 5.5 % on-year to $919 million (in US constant currency terms) in the three months to December from $871 million a year ago. It grew by 5.4% when adjusted for divestment of tower assets.

In an official statement this week, Managing Director of Airtel Africa, Raghunath Mandava, said; “Underlying Africa revenue growth for the quarter accelerated to 6% on-year, which is the highest in the last nine quarters.”

According to him, the company’s efforts to improve the quality of customer acquisitions in Africa led to “a reduction in customer churn to 4.9% from 6%,” and continuing focus on cost control led to a 4.9% on-year expansion in underlying Ebitda margin to 24.5%” in the December quarter.

Recall that this same time last year, Chairman Mittal had disclosed that the telecommunications firm, which currently enjoys 22.14 percent market share in Nigeria and services 34.1 million customers would not exit Africa, despite the harsh economic conditions.

According to ETTelecom.com, Mittal, had noted that though, there are challenges in the region, “we are committed to Africa. No plans to exit the market.”

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Industry sources in Nigeria believe that the economic challenges in the country, including lack of access to foreign exchange for operators, devaluation of the Nigerian currency, fall in the Average Revenue per User (ARPU), lack of disposable incomes among the citizens could also have escalated the challenges telecommunication operators are facing in the country.