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Bharti Airtel today said it has no plans to exit its African operations even as the company has entered into talks with France-based Orange to sell four subsidiaries in the continent.
Airtel has termed it as “a win-win” for both. The telecom major, without sharing the financial details, said the proposed transaction, along with divestment of towers, will help it keep a sharper focus on the remaining countries and significantly cut down debt.
“We believe that the proposed transaction along with our recent strategic divestment of towers will help us establish a sharper focus on the remaining countries, significantly reduce the debt and thereby, give a boost to our aim of achieving net profit and free cash flow in Africa at the earliest,” a company statement said.
“We remain fully committed to our Africa operations and will continue to invest in its growth and building a profitable business and have no plans to exit Africa,” a Bharti spokesperson said.
The company had yesterday said it has entered into an agreement with Orange to sell its four subsidiaries in Africa, though there is no certainty of any binding agreement as a result of these discussions.
As per company’s statement late last night, it will sell its subsidiaries in Burkina Faso, Chad, Congo Brazzaville and Sierra Leone to Orange.
Airtel said it has invested and established quality operations in these four countries.
“Since Orange is not present in these markets, our operations are a natural fit for them — strategically and culturally — while this transaction enhances the value for our shareholders.
“This transaction accordingly is a win-win for both while ensuring that the operations are handed over to an operator who continues to be equally committed to these countries,” Airtel said.
As of March 31, 2014, the total revenue from these four countries stood at approximately USD 730 million, some 16 per cent of its overall African pie.
Airtel has completed the sale of mobile towers in five African nations for USD 1.3 billion and the process is under way to sell tower assets in six others.
Airtel had entered the African market in 2010 after acquiring Zain Telecom for about USD 10.7 billion. The company now offers services in 17 African countries, but is yet to turn profitable.
More about the talks
Airtel is looking to sell its operations in Burkina Faso, Chad, Congo Brazzaville and Sierra Leone, all Francophone countries, or non-English speaking markets in Africa, a continent where the company has been making losses since its entry in 2010 which has been dragging the carrier’s consolidated financials. Sources say Airtel is looking for a valuation between $900 million and $1 billion for the sale.
The four countries in question roughly contributed about $650-660 million to Airtel Africa’s top line of $4.71 billion as of Marchend. Earnings before interest, taxes, depreciation & amortization (EBITDA) for the four countries was close to $180 million in the period.
“Orange and Airtel have entered into an exclusive agreement to explore the possible acquisition by Orange of Airtel’s subsidiaries in Burkina Faso, Chad, Congo Brazzaville and Sierra Leone,” a statement issued by Bharti said on Monday.
However, the statement added that these were only negotiations and there was “no certainty” of any binding agreement as a result of these discussions. It didn’t provide any further details. Africa has long been a drag on Bharti’s overall performance, often offsetting the healthy growth numbers the company registered in its Indian operations.
Airtel’s net loss in Africa for the fiscal fourth quarter of the year ended March 2015 widened to $183 million (Rs 1,155.7 crore) from $105 million (Rs 663.1 crore) a year back, hurt by forex losses.
The company’s Africa revenue had dropped by 12.6% in the quarter ended March 2015 over last year to $1 billion, from $1.14 billion in the same quarter last year. The growth was limited by currency depreciation of 18.4%, in reported currency terms. The company has 76.3 million subscribers in Africa that grew 9.8% year on year.
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