Podcast | A new hope for Airtel in Africa

A not so long long time ago, in a country all around us, Airtel and Vodafone were almost undisputed leaders of the telecom market. Enter a juggernaut called Reliance Jio, and with it, tremors in the apple cart. Vodafone and Idea are about to form an alliance; Jio continues to roll on grabbing with it Saavn and as many ears and eyeballs as it can along the way in its aggressive bid to close the gap with its rivals; and Airtel remains the market leader – for now – and according to an Economic Times survey, still the most admired company in India in the telecom space. Airtel is now also training its eyes on a territory that has suddenly become profitable – Africa. With the players placed the way they are and the race for telecom supremacy ever intensifying, we start a new series a day after Star Wars Day, May the 4th. This is Telecom Wars – Episode One, A New Hope for Airtel in Africa.

My name is Rakesh; this is Moneycontrol and buckle up as we take a hyperdrive down to the frontlines of the Telecom Wars.

Reports emerged today that Bharti Airtel plans to raise as much as $1.5 billion by diluting about 25% of its stake when it lists the holding company for Africa operations, Bharti Airtel International (Netherlands) BV, or BAIN BV, in early 2019 on the London Stock Exchange. At its upper end, it would also mean that the holding company will be valued at about $6 billion. The money obtained through dilution will help bolster Airtel’s efforts to stay competitive in the Indian market, where Bharti has just declared its first ever quarterly loss. Net loss, before exceptional items, for the India business in the three months ended March 31, 2018, stood at Rs 652.30 crore, compared with a net profit of Rs 770.80 crore a year earlier, the Sunil Mittal-led telco said in a statement on Tuesday. This is in contrast with the profits it is seeing in Africa now – just this quarter alone, the Africa operations posted a profit of 698.7 crores, sparing the company some blushes. Ironically enough, when Airtel started its Africa operations, it was widely considered a poor move. In response to a question on the one business decision that he regrets the most, Sunil Mittal himself said Africa may have been a poor decision. “We all must have made lots of mistakes. Lots of decision when I look back, I wish they were better thought through. If you pin me down to one, I would say in 2010 our decision to go to Africa was a bit rushed and that has taken 6-7-8 years and lot of resources and my personal time to fix that.” Look how things have changed in 2018. Like the saying goes, there is always money in the banana stand. And well, as it turns out, in Africa.

BAIN BV, the Netherlands-based wholly-owned unit of Bharti Airtel is the holding company of telecom operations in 14 African markets — Nigeria, Chad, Congo-Brazzaville, Democratic Republic of Congo, Gabon, Madagascar, Niger, Kenya, Malawi, Seychelles, Tanzania, Uganda, Zambia and Rwanda. Airtel entered the African market in 2010 with the $10.7 billion acquisition of Zain Telecom. Africa operations, this March, have completed a year of being profitable for Airtel. Meaning, for about seven years, they were not. Net profit amounted to Rs 1,827 crore on revenue of Rs 20,156 crore, marking a 180 from previous years when losses mounted every quarter, dragging down consolidated numbers and along the way, many doubts expressed on Bharti’s strategy of expansion into Africa. The Africa gamble, for now, seems to have paid off. Especially in comparison with what we got to see in Airtel’s latest earnings here in India. The India business posted losses, but the company overall just about eked out a net profit of Rs 83 crore on a consolidated basis — also its lowest in nearly one-and-a-half decades — in the just-ended quarter, a 78% year-on-year drop. The miss from plunging into overall losses could well be thanks its Africa operations. Thanks to Africa ops, some predictions were proven wrong – some brokerages expected the company to post a net loss, in what would have been its first in 15 years. An Economic Times report dated 4 April reported that the Bank of America-Merrill Lynch had estimated the loss at Rs58.5 crore, while Kotak Securities at Rs377 crore. Enter Africa to save the day. Wakanda forever?