Exiting Kenya, Rwanda, Tanzania to help Airtel boost margins: Analysts

KOLKATA: The prospect of Bharti Airtel exiting Kenya, Rwanda and Tanzania and also monetising more tower assets in five non-profitable markets would help the Sunil Mittal-led telco reduce leverage and boost margins in Africa, analysts said. Chairman Sunil Mittal had recently told ET that Bharti Airtel needs to exit these three African markets, and is in active discussions to explore a mix of an intra-country sale, a purchase or a merger.

“Such asset sales could help Bharti reduce leverage further and potentially help expand margins,” said brokerage Goldman Sachs, adding that “the three countries where Bharti is looking for exits/M&A options have margins significantly lower vs the current Africa average”.

Separately, analysts said if Airtel’s stated interest in buying 9mobile (formerly, Etisalat Nigeria) – the fourthlargest mobile carrier in Nigeria – translates in a deal, it would become the largest telco by subscribers in a market that is Bharti’s largest in Africa and generates 30% of its revenues in the continent.

“We take no view on a potential transaction, but a simple sum of the respective market shares of Bharti and 9mobile would suggest a No 1operator in Nigeria by subscribers, slightly ahead of present market leader MTN,” Goldman Sachs said. Mittal had also told ET in a recent interview that Airtel is keen on erstwhile Etisalat Nigeria, which is now called 9mobile, and is up for sale.

At present, Bharti is the third-largest telco in Nigeria with a 25% subscriber market share, while fourthlargest, 9mobile has 12%. If Airtel were to acquire 9mobile, its customer market share at 37% would be a tad higher than MTN’s 36%.

According to analysts, although the Africa operation has historically been a drag on Bharti Airtel, over the past 3-4 years, the Sunil Mittal-led telco has divested $3.3 billion worth of assets, “which has helped reduce Africa debt levels by as much as 40%”.

In fact, a combination of debt reduction and improving Ebitda margins, they said, helped Airtel’s Africa business turn net profit positive in the first quarter of FY18. In September quarter, the telco reported a profit of $48 million in Africa compared with a loss of $91 million a year ago, helped by growth in data customers and consumption, and stringent cost controls.

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