Bharti Airtel to sell more infra in Africa To reduce debt and cut capital expenditure on passive infrastructure

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Bharti Airtel, the country’s largest mobile telephone operator, will sell more infrastructure in Africa, said its chief financial officer, Nilanjan Roy, on Wednesday.

This is to reduce debt and cut capital expenditure on passive infrastructure. The announcement comes within a month of Bharti Airtel International (Netherlands) BV, a subsidiary, announcing plans to sell 3,100 of its 15,000 telecom towers in Africa to Helios Towers.

Bharti Airtel, since its entry to the African region in 2010, has been taking the pressure of the under-performance in operations across the 17 countries there where it is present. Even in the recent April-June quarter, its net loss for the African business was $137 million, compared to $52 mn in the corresponding period last year.

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Consolidated net debt was Rs 57,744 crore ($9.6 billion) at the end of June, down from Rs 60,541 crore ($10.07 bn) till end-March. Most of Bharti’s debt is because of its $10.7-bn acquisition of Zain Telecom’s Africa business in 2010.

Analysts expect it will have to take the pressure for a few more quarters, as Africa is likely to continue sub-performing.

“Under-performance in Africa continued to hurt Bharti Airtel’s overall business even in the last quarter and this may continue for a few more quarters,” said an analyst with Phillip Capital.

Its revenue rose 17.5 per cent in the quarter under review over the same period last year but net losses widened, mainly due to foreign exchange losses. Revenue from the 17 countries in Africa rose to Rs 6,698 crore, compared to Rs 5,931 crore in the same quarter last year. In dollar terms, revenue was up 10 per cent to $1,164 million for the same period.

Earnings before interest and tax, an indicator of profitability, in Africa dropped 27 per cent (in dollar terms) during the April-June quarter.

“While Africa and non-mobile businesses were a drag on Bharti’s performance, this was more than offset by the robust India performance,” Standard Chartered said in an equity research report.

However, Christian de Faria, managing director, Airtel Africa, believes telecoms are back to growth in Africa, spearheaded by the internet and mobile money. But, Airtel has actually marginally lost subscribers in Africa to 69.08 million (June) from 69.44 million (March). The subscriber base was impacted by regulatory issues in Nigeria and Uganda, said Shobhit Khare of Motilal Oswal in his report.

According to UBS analysts, the growth in Africa was primarily led by data, with voice revenue remaining flat. In Africa, voice average realisation per minute (ARPM) remained unchanged in April-June at $3.23, while data ARPM increased by eight per cent, as the company has expanded its third generation (3G) services across all 17 countries there.

However, data revenue stood at $102 mn or only 8.8 per cent of its total Africa revenue. In the corresponding quarter of last year, data contributed 5.3 per cent.

According to the company, about 4.3 million customers actively use the Airtel Money service across its operations. “Airtel has grown by 12.1 per cent in constant currency terms,with exceptional performance in Mobile Data (higher by 85.5 per cent). Airtel Money transaction values have increased by 4.9 times to $2.2 bn in this quarter, said Faria.

Average revenue per user from data also increased to $1.50 from $1.23 in the same comparison period, as average data usage rose 36.7 per cent. According to Kunal Vohra of BNP Paribas, “Africa revenue growth in dollar terms was decent at 9.6 per cent year-on-year but Ebitda (operating earnings) was flat y-o-y, as the margin slipped to 24.3 per cent. Margin pressure stemmed from higher operational costs.”

Mili Thakur