Heavy debt load leaves Air­tel in Sh8 bil­lion loss

Business Daily (Kenya) - - FRONT PAGE - Muthoki Mumo mu­mumo@ke.na­tion­media.com

Tele­coms ser­vice provider Air­tel Kenya ended the 2016 fi­nan­cial year with a Sh45 bil­lion debt load, a new­lyre­leased an­nual fi­nan­cial re­port says.

The re­port, which was pub­lished on the Delhi-based par­ent com­pany’s web­site, has for the very first time made pub­lic the in­ner de­tails of the com­pany’s fi­nan­cial health – that has left the com­pany deep in the loss-mak­ing ter­ri­tory.

Air­tel’s cur­rent li­a­bil­i­ties of Sh55.3 bil­lion in the year to De­cem­ber 2016 far ex­ceeded its cur­rent as­sets worth Sh9.7 bil­lion, in­di­cat­ing Kenya’s sec­ond largest tele­coms op­er­a­tor is tech­ni­cally in­sol­vent.

The com­pany’s cur­rent ra­tio - an ac­count­ing stan­dard used to mea­sure liq­uid­ity po­si­tion – stood at 0.18. Air­tel’s pre­car­i­ous fi­nan­cial po­si­tion means it would have been un­able to meet its fi­nan­cial obli­ga­tions ma­tur­ing in 2017, even if it sold all as­sets that could be read­ily liq­ui­dated.

The heavy debt load heav­ily eroded the com­pany’s bot­tom­line leav­ing it with an Sh8.1 bil­lion af­ter tax loss in the year to De­cem­ber 2016. The out­come was in­dica­tive of a nor­mal­iza­tion in Air­tel’s books af­ter the Sh7.1 bil­lion profit af­ter tax it recorded in 2015 on ac­count of a one-off rev­enue boost from the sale of Kenya tow­ers.

Air­tel re­ported a Sh7.1 bil­lion loss in 2014 and by De­cem­ber 2016, the tele­coms op­er­a­tor had ac­cu­mu­lated losses worth Sh59.3 bil­lion, ac­cord­ing to the fi­nan­cial re­port.

“These con­di­tions give rise to a ma­te­rial un­cer­tainty, which may cast sig­nif­i­cant doubt on the com­pany’s abil­ity to con­tinue as a go­ing con­cern, and there­fore that it may be un­able to re­al­ize its as­sets and dis­charge li­a­bil­i­ties in the nor­mal course of busi­ness,” a note ac­com­pa­ny­ing the state­ments says.


di­rec­tors, how­ever, ar­gue in the same re­port that the com­pany’s sur­vival is hinged on meet­ing the tar­get subscriber num­bers and rev­enue. The di­rec­tors fur­ther in­di­cate that plans are afoot to “ob­tain fund­ing from third par­ties” and that share­hold­ers have com­mit­ted to pro­vide fund­ing in or­der to meet the com­pany’s fi­nan­cial obli­ga­tions. The re­port shows that Air­tel con­tin­ues to heav­ily rely on its share­hold­ers for fi­nanc­ing.

Share­holder loans rose from Sh31.4 bil­lion in 2015 to Sh37.6 bil­lion in 2016, ac­count­ing for 68 per cent of the com­pany’s to­tal cur­rent li­a­bil­i­ties. The op­er­a­tor’s rev­enue stood at Sh16.92 bil­lion in 2016 from Sh17.73 bil­lion in 2015. How­ever, the 2015 fig­ures were fur­ther boosted by “other in­come” of Sh21.3 bil­lion in­clud­ing a Sh18 bil­lion profit from the sale of Kenya tow­ers.

In 2014, Air­tel re­ported rev­enue of 15.28 bil­lion. Air­tel is Kenya’s sec­ond largest tele­com op­er­a­tor by subscriber base and the lat­est fi­nan­cials drive home the sig­nif­i­cant dis­par­ity in per­for­mance among tele­coms sec­tor com­pa­nies. Air­tel and Telkom Kenya, the third largest op­er­a­tor, per­for­mance pales in com­par­i­son with mar­ket leader Sa­fari­com, which re­ported Sh212.9 bil­lion in to­tal rev­enues and a Sh48.44 bil­lion in profit af­ter tax for the year to March 2017.

The smaller tele­com op­er­a­tors have long ar­gued that Sa­fari­com’s mar­ket dom­i­nance does not cre­ate a con­ducive en­vi­ron­ment for com­pe­ti­tion.

Air­tel Kenya is owned, through hold­ing com­pa­nies, by In­dian multi­na­tional Bharti Air­tel, which has a pres­ence in 15 African coun­tries. In its 2017 an­nual re­port, Bharti Air­tel re­ported that per­for­mance of its African op­er­a­tion was “slug­gish”, hav­ing been neg­a­tively af­fected by cur­rency fluc­tu­a­tions.

The com­pany, how­ever, said Air­tel Africa had posted pos­i­tive profit be­fore tax in 2016-17 for the first time since mov­ing into the con­ti­nent. Bharti Air­tel now says that it is com­mit­ted to turning around its Africa op­er­a­tions, a move that is be­ing driven by a “war on waste” as it seeks to drive down op­er­a­tional ex­pen­di­ture. This “war” has man­i­fested it­self in the sale and lease­back of tower in­fra­struc­ture.

In its 2017 an­nual re­port, Bharti Air­tel re­ported that per­for­mance of its African op­er­a­tion was “slug­gish”


LOSSES Mr Pras­anta Das Sarma, Air­tel Kenya CEO,

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