Africa listing positive for Bharti Airtel

Will help the firm to raise funds to compete with RJio

Bharti Airtel International Netherlands’s (BAIN’s) decision to look at a possible listing for its Africa operations might be positive for Bharti Airtel.

While it would not bring about any changes in the Africa operations, a listing will help Airtel raise additional funds.

The decision would also provide international investors an opportunity to gain exposure in the African market.

Africa accounts for 20-25 per cent of Bharti Airtel’s consolidated revenues and operating profit.

An analyst with a foreign brokerage said, “As was the case with Bharti Infratel, a listing followed by paring of stake will help Bharti Airtel to raise money to reduce debt, fund expansion of data networks, or create a cash chest to fight Reliance Jio’s aggressive pricing.”

Bharti Airtel pared its stake in Bharti Infratel to 53 per cent from the earlier 75 per cent.

The best comparable metric for Bharti’s Africa operations is the continent’s largest telco — MTN Group. Listed on the Johannesburg Stock Exchange and with a market capitalisation of $17 billion, MTN also has a presence in West Asia with 230.2 million subscribers.

The stock is trading at 5.6 times its 2017 enterprise value to operating profit ratio. Analysts said Bharti’s Africa operations could get similar valuations.

Interestingly, BAIN’s decision comes barely a week after MTN’s Nigerian unit decided to list on the Lagos Stock Exchange. Nigeria is the largest telecom market for both MTN and Bharti’s African operations. It accounts for about a third of their revenues. The uptick in crude oil prices helped the Nigerian economy, with the stock market gaining over 40 per cent over the last one year. Bharti’s improving performance in recent quarters could help it get a good valuation for its Africa operations.

The company’s operating profit margins for the Africa business doubled from 17 per cent in Q1FY16 to 35.5 per cent in Q3FY18, on the back of cost initiatives.

Lack of traction in Nigerian and Kenyan markets dominated by MTN and Safaricom, where Bharti’s revenue market share is under 20 per cent, will continue to be a challenge for the Indian telco.