Airtel readies $2.4 bn war chest for 4G push in Africa
The firm is also preparing for an initial public offer for its Africa unit
NEW DELHI: With its Indian wireless business revenue under pressure on the back of a tariff battle with Reliance Jio, Bharti Airtel has decided to up the ante in Africa with a war chest of up to $2.4 billion to expand its 4G services across the continent.
The Indian telecom operator is also preparing for an initial public offer for its Africa unit in Junejuly after having successfully raised $1.25 billion in a pre-ipo fund raise.
“Africa has good prospects. Lot of population. Data is just about starting in Africa. We will take a lead in 4G in Africa. We will spend about $700-800 million a year over 2-3 years to expand 4G services and this money will come from Africa operations itself,” one person with direct knowledge of the matter said, requesting anonymity.
At present, the company offers 4G services in 10 African nations.
The company declined to comment on an email query from Mint.
Airtel Africa is the holding company of Bharti Airtel’s operations in 14 countries in the continent. The Africa operations started in 2010 when it bought Kuwait-based telecom operator Zain’s Africa operations for $10.7 billion.
Over the past few years, it has been trying to capture the African market through local deals. It has so far made three small acquisitions in Uganda, Congo Brazzaville and Kenya. In October 2017, Airtel had inked a deal with Millicom, which operates the Tigo brand, to combine their operations in Ghana. In December the same year, Airtel’s subsidiary in Rwanda had announced the acquisition of Tigo Rwanda Ltd, making Airtel the second largest telecom firm in the African nation. Till date, Bharti Airtel has invested close to $8 billion in Africa. In February 2018, it had announced that it will consider an IPO for the Africa business. In October, the company announced that six global investors, including Warburg Pincus, Temasek, Singtel and Softbank Group International, will invest $1.25 billion through a primary equity issuance in Airtel Africa Ltd. The funds will be used to reduce Airtel Africa’s debt, which then stood at $5 billion, and for growth of its operations, which have seen a turnaround in recent quarters.
In July-september, Airtel Africa’s revenue was $824 million, up by 11% as compared to $743 million in the corresponding quarter last year. Data customers during the quarter increased by 6.6 million from 20.5 million in the corresponding period of the previous year to 27.1 million. Bharti Airtel will announce financial results for the October-december quarter on 31 January.
South Africa-based multinational mobile telecommunications company MTN is the number one operator in most countries in Africa, especially Nigeria, which is the biggest market for telecom services in the continent. Almost one-third of Airtel Africa’s EBITDA comes from operations in Nigeria.
“MTN is very strong in Africa, but we are beating them everywhere now on an incremental revenue basis. We are number two in Nigeria…we have a long way to go in Africa, but we are plugging in very well. Our aim is to be number one or a strong number two in every country in Africa,” the person said.
In the September quarter, Airtel spent $106 million in capital expenditure for its Africa operations, mostly on investment in data capacities and network modernization. The operating free cash flow from the region was $200 million, as compared to $196 million in the corresponding quarter last year.
Back home in India, too, the company plans to build a war chest to take on Reliance Jio. Last month, Bharti Airtel formed a special committee to explore and evaluate fundraising options with an aim to strengthen its capital structure and balance sheet.