Airtel exiting Francophone markets to pare debt.
When Bharti Airtel acquired the African assets of Zain Telecom across 17 countries in 2010 at $10.7 billion, many thought the sum was on the higher side for the loss-making operations.
Airtel was confident that it would be able to replicate the India experience—low tariff and high volume—and turn around the operations to add to its overall telecom portfolio. As that has not happened after five years, the company is looking to exit the Francophone (French-speaking) countries—Burkina Faso, Chad, Congo Brazaville and Sierra Leone—where it is profitable. While there is no certainty that the talks with France-based Orange will work, this is the first step for Bharti to reduce its African exposure. With revenues of $659 million—14.5% of its total $4,543 million from Africa in FY14—these countries notched up a profit of $23 million against a total loss of $329 million in the region. While Burkina Faso recorded most of the profit (at $43 million), Sierra Leone made a nominal $3 million—Chad ($2 million) and Congo Brazaville ($20 million) are in the red. The four markets, with 9 million subscribers that account for 12% of Bharti’s African subscribers, have been better performers with revenue growth of 24%.
Bharti is among the top two operators in these countries accounting for 46% of the subscriber base in Congo Brazaville, 43% in Chad, 38% in Burkina Faso and 21% in Sierra Leone. This is the reason why Orange, with a presence in 29 countries, is interested in buying Airtel’s business in only these four countries. Bharti could earn anything between $681 million to $1.4 billion from the sell-off. Any sale of profitable assets could lead to an increase in Airtel’s losses. But, the big positive is that this sale, along with that of its African tower-assets, could help the company raise close to $3 billion, which can be utilised to reduce its net debt of $10.67 billion at the end of March 2015. That’s critical since it will need to invest big time in India over the next few years. This could well, be the first step back for Bharti to compete hard in India. It remains to be seen whether it will restrict itself to only the large markets in the Dark Continent, but the signals suggest that it may be only a matter of time before Airtel makes it amply clear.