Airtel Encouraged To Leave Kenya And Tanzania In Order To Concentrate On Telecommunication In Nigeria
According to a commentary by Goldman Sachs, a market analyst and brokerage firm, the dropping of Kenya, Rwanda, and Tanzania to focus on providing telecommunication in Nigeria could rescue Airtel, as well as give a boost to its margins in the African market.
As contained in the analysis which was published by the Economic Times of India, the exit of Airtel from Eastern Africa, coupled with the monetisation of towers owned by it in five other non-profitable markets would aid the company in boosting its margin and in reducing leverage.
Airtel has also been known to be looking into strategic exits from the African market in order to focus on its Asian operations and chairman of the Indian company, Sunil Mittal has already indicated that the company needs to make an exit from the Kenyan, Tanzanian and Rwandan markets, having recorded significantly lower margins, lower than the current African average.
“This exit will be explored via intra-country sales, purchase or a merger”, he said.
Meanwhile, other analysts have said that if Airtel is able to make a deal out its stated interest in buying 9mobile, which used to be Etisalat Nigeria, the fourth largest mobile carrier in Nigeria, then it would become the largest subscribed merchant for telecommunication in Nigeria, which is Airtel’s current largest market in Africa, generating up to 30% of its revenue on the African 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.
In a recent interview with ET, Airtel boss, Mittal, had said that the company was keen on purchasing Etisalat Nigeria, now known as 9mobile and is available for sale.
In current rankings, Bharti is the third largest merchant of telecommunication in Nigeria, possessing a 25% market share of subscribers, topping 9mobile ranks fourth with 12%.
Success in acquiring 9mobile would translate into a 37% subscriber market share, placing the telecommunication company a bit higher than MTN, which holds a 36% share.
The analysts have also said, however, that although Bharti Airtel’s records of operation in Africa over the past 3 years have been slow, the company has successfully divested assets worth up to $3.3 billion, which has brought about a 40% reduction in debt levels in Africa.
The combination of debt reduction and the improvement of Ebitda margins is also said to have helped Airtel’s business in the African Market to turn profit positive in the quarter of FY18.
In the September quarter also, the telecommunication company 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 in consumption, and serious cost controls.