By Moses Kaketo
In February 2015, Sunil Bharti Mittal, the founder and Chairman Bharti Airtel told senior managers of Airtel Africa in Dubai that he wanted to see growth on all Airtel Africa’s key parameters that is: Data, mobile money, Voice, and revenue. Seven months later, how much growth has been realised? – Nothing! At least not from the latest figures.
As of March 2015, the Airtel Africa had posted a net loss of $154m (Ugx.563.4b), widening from $137m (Ugx. 501.4b) it had registered as of March 31, 2015. Total revenue earnings dropped to $970m (Ugx.3.5 trillion) from $1.16b (Ugx. 3.89 trillion)
In fact, nearly all the remaining Airtel Africa subsidiaries are struggling, posting losses. For example, as at 31 December 2013, Airtel Uganda’s total liabilities exceeded the company’s assets by Ugx. 118,642 m arising from accumulated losses incurred from the previous years.
People buy shares to make money. Shareholders want dividends and to stories of accumulated losses. In fact, they are saying that they either get dividends or sell off Africa segment. At one point, they wanted to sell off the entire Airtel Africa segment but failed to get serious buyer. They now resorted to selling in clusters. The first cluster involving Burkina Faso, Chad, Congo Brazzaville, was sold to Orange.
Highly placed sources tell newz.ug that the next cluster, consisting of, Rwanda, Tanzania, Kenya, Uganda and Zambia is on sale.
The challenge however is that, Airtel Africa management is looking for single buyer who can buy all these at once. While Airtel seeks to liquidate its failed Africa ‘plants’, the firm will continue to incur losses, which in turn will reduce its reserve price as the buy will inherit the liabilities.
Tough times for Airtel in Africa
In Kenya, Airtel is said to be fighting with a giant-Safaricom. The situation with Airtel Kenya is said to be going t the dogs. That Airtel CEO threatened to quit Kenya over Safaricom. “We have been trying for over five years and have not made one dollar in profit. Airtel is likely to exit Kenya if the market structure is not addressed in terms of dominance,” said Adil El Youssefi, the Airtel Kenya boss. He added: in five years, Airtel had lost more than Ksh 50 billion in the Kenyan market.
Safaricom has more than 23 million subscribers against Airtel Kenya’s three million subscribers- a virtual monoploly. Even worse Safaricom has 12 million subscribers on mobile money while Airtel has about 250,000 subscribers.
That is tip of the iceberg. The labour turn over in Airtel Kenya is said to be so high that leading Banks in Kenya hardly want to extend loans to Airtel employees. They fear, and genuinely so, that the borrower may be sacked or resign the next day.
At group level, the situation is not so different. Either cost costing move or otherwise, the number of employees at group level in Nairobi has been reducing in the recent past. The number according to market intelligence reports has been reducing from 190 to 120 in a space of less than five months and more are set to move on. That is what happens when the company fails to promise job security.
In Uganda, as you will notice in our next article, the situation is not rosy either. So are the operations in Democratic Republic of Congo, Rwanda and Zambia.
The telecom Industry in Africa is not as profitable as it used to be in the yesteryears. Thus Airtel Africa is finding it hard to get a single buyer for the remaining operations in Africa.
Among the potential buyers is Tigo. However, Tigo is said to be careful of markets they enter. They prefer to enter markets where they are not. In Tanzania they are number two. In Rwanda they are neck to neck with MTN Rwanda-with no serious reasons to build struggling Airtel Rwanda. May be to consolidate their market. Tigo is also in DRC.
The only country Tigo might be interested in, is Uganda. A few years ago, they had plans to enter Ugandan market. Since then, things have changed, the Ugandan market is no longer profitable yet it’s very competitive. According to our informed speculation, Tigo may only come in, if the sale price is favorable.
Vodafone is said to be interested in the East Africa market. They are already in Uganda though struggling. Unfortunately, with Airtel wanting to sell the remaining operations as cluster, Vodafone might be ruled out.
Vodafone is already in Kenya trading as Safaricom, the regulator in Kenya cannot allow them to buy Airtel Kenya otherwise this might create a monopoly. The other potential buyer could be Orange. They brought the first cluster and may be interested in this as well. However, a year ago, they quit Uganda operations and sold to Africell having posted huge losses for all the years they operated.
As they look for a buyer, cost cutting measures have been adopted but these are like propping a smoldering edifice. Airtel Africa is sinking. It’s current financial position and human resource failings make its glory irrecoverable gone. More than 60 employees have been sacked at Airtel Africa office in Nairobi. Similar cost cutting measures have been undertaken across Africa. What else do you do when the mother company says no more funds and buyers are hard to find?
The best possible move is to sell the company, even if at give away price. Since few investors might be bent to acquire an entire company of Airtel Africa’s current stature, the shareholder might find it reasonable to look for customers who can take over business in single countries.