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Bharti Airtel Ltd., India’s largest mobile-phone operator, is considering mergers or stake sales at some of its Africa operations as it looks to cut debt and make its biggest overseas acquisition profitable.
Chairman Sunil Bharti Mittal said in an interview with BloombergQuint at the World Economic Forum in Davos. Some of Bharti’s businesses in 15 African nations would be affected, he said.
The report via Bloomberg claims that Airtel “is considering mergers or stake sales at some of its Africa operations as it looks to cut debt and make its biggest overseas acquisition profitable.”
In September 2011, Airtel joined the Rwandan telecommunication market investing US$100 million for three years the multi-million investment package included US$30 million to purchase the operating license.
Rwanda became Bharti Airtel’s 17th operation across Africa. Today, the telecom has 1.5million subscribers and introduced the company also scrapped transfer charges previously levied on a customer to send or receive money via its Airtel money business.
In Kenya alone, the firm has already fired about half of its staff as it struggles with competition. In 5yrs.
Airtel has battles at home
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 company has sold its Sierra Leone and Burkina Faso operations, as well as some of its tower businesses, as it reorganizes assets it bought in 2010 in a $9 billion deal with Kuwait’s largest mobile-phone operator.
Bharti’s African unit lost $91 million in the quarter ended September, compared with a $170 million loss in the previous year.
As part of the debt reduction, Bharti is also considering selling a stake in Bharti Infratel Ltd., its tower unit according to sources. A committee was studying whether the sale would be a minority stake or control of the tower unit and a decision could be taken in a month, Mittal said.
In October last year, Bharti said in a stock exchange filing that it had formed a committee to evaluate options for its 73.5 percent stake in Bharti Infratel.
According to Bloomberg, Mittal’s move comes partly in response to the entry of India’s richest man Mukesh Ambani into India’s wireless telecommunications market last year.
Ambani stormed into what was already one of the most brutally competitive telecom markets in the world with an offer of free voice services, forever, and free data services for limited time.
Ambani’s Jio mobile-phone service will probably force the exit of the smaller players in a market with almost a dozen operators, Mittal said in the interview. Among them is Telenor ASA, the Nordic region’s largest phone company. Bharti was among those in discussions to buy Telenor’s India business, Mittal said.
The exit of Bharti Airtel from Africa: is it ‘fait accompli’? What is really fuelling such speculations about the imminent exit of the India-owned Mobile Network Operator from the continent?
Why would a brand that is regarded as the third largest MNO in the world; in terms of subscriber numbers (behind China Mobile and Vodafone Group, according to data published by the World Cellular Information Service) that showed Airtel with over 303 million mobile subscribers across its operations choose to off-load its assets in Africa?
Bharti acquired Zain telecom’s African assets in 17 countries in 2010 for $10.7 billion. After consecutive years of registering losses, Bharti Airtel’s net loss in Africa for the fiscal fourth quarter of the year ended March 2015 widened to $183 million from $105 million a year back, hurt by forex losses. Its Africa revenue dropped to $1 billion in the quarter ended March 2015 from $1.14 billion in the same quarter a year earlier.
Before the acquisition of the African assets in 2010, Bharti Airtel was reporting revenue of about $228 million and a subscriber base of 42 million. But the company had ambitious plan upon its entry into the continent.
The company targeted revenue of $5 billion (from $3.6 billion at the time of the acquisition in 2010), EBIDTA (earnings before interest, depreciation, taxation, and amortisation) of $2 billion ($ 228 million at the end of December 2010 before the rebranding) and a subscriber base of 100 million (42 million in 2010) by 2013.
But five years into that operation, Bharti Airtel did not seem to have achieved its own set target. At the end of March 2015, Bharti Airtel had a net loss of $585 million on revenue of $4.4 billion from its African operations, and its subscriber base was 76 million instead of the projected 100 million.
But it was still vehement in its claim to defend its turf in Africa. “We remain fully committed to Africa operations and will continue to invest in its growth and building a profitable business and have no plans to exit Africa”, it said in a statement.
Airtel Africa’s Chief Commercial Officer left the firm as it mulls sale of Africa unit. Farhan Khan, Airtel Africa’s Chief Commercial Officer left the telecom company to join Al-Yah Satellite Communications Company as its new Chief Commercial Officer with media reporting Airtel is mulling sale of its pan-African operations.
According to analysts, the leaving of the telco’s COO might signal more danger for the telco than anticipated. The rest of the Airtel operations are not doing any good either.
Appointed in January 2015, Farhad Khan was plucked from MTN South Africa where he led the firm’s Sales and Distribution since August 2013.
If the circulating news turns up to be true then the affected countries will include: Chad, Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Rwanda, Seychelles, Tanzania, Uganda and Zambia.
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