Airtel struggles in market controlled by rival Vodacom

Monday August 5 2019

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Residents register their Airtel communication lines outside the company's offices in Mombasa in November 2017. The Kenyan and Rwandan units of Bharti Airtel have posted a combined loss of $30.6 million, as they still struggle in a market controlled by Vodacom and its subsidiaries. PHOTO | FILE | NATION MEDIA GROUP 

By The EastAfrican

The Kenyan and Rwandan units of Indian telecommunication giant Bharti Airtel have posted a combined loss of $30.6 million, as they still struggle in a market controlled by Vodacom and its subsidiaries.

In the East African market, only the Uganda unit maintained profitability, posting a profit of $90.5 million, up from $65.6 million, an almost 40 per cent growth.

STRUGGLING

Airtel Kenya posted a $27.43 million loss for last year, down from a $59.5 million loss in 2017, while the Rwandan unit saw its loss widen tenfold to $3.16 million last year, barely a year after it bought out Tigo. It booked a tax loss of $3.32 million.

The poor but improved performance of the regional units shows that the firm is still struggling to find a foothold in the region as it keeps these units afloat through borrowing.

Airtel Kenya’s net liability position had risen to $364.09 million as of December 2018, from $336.66 million in 2017.

The Kenyan unit’s current liabilities exceed its assets by a whopping $77.26 million, having risen from $27.14 million in 2017, pushing the firm deeper into insolvency, even as it awaits regulatory approval to merge with Telkom Kenya, the country’s third-largest telecommunications firm.

Airtel’s loss position is blamed on higher sales, finance, administrative and distribution costs and other unexplained expenses, which gobbled up $208.8 million of the firm’s income.

Its precarious financial position means that it will not meet its financial obligations this year, even if it sold all assets that could be readily liquidated.

A note accompanying the firm’s statements says: “These conditions give rise to a material uncertainty, which may cast significant doubt on the company’s ability to continue as a going concern, and therefore that it may be unable to realise its assets and discharge liabilities in the normal course of business.”

Airtel Kenya directors, however, say that the firm has obtained a commitment from its major shareholder to obtain additional funding in order to meet its obligations when they fall due.

CONTINUOUS GROWTH

Airtel Kenya’s revenues increased to $194.5 million in 2018, up from $159.26 million the previous year, pushed by voice revenue, which rose to $94.9 million, from $73.08 million the previous year.

Data revenue increased to $52.2 million, from $35.11 million in 2017.

The firm booked a $5.86 million loss on suspected fraud by its employees last year, via its Airtel Money platform, for which it has since been paid $816,274 by its insurer, AIG Kenya. This is one of the biggest corporate thefts in recent history.

In Uganda, Airtel’s revenues rose to $321.3 million last year, up from $309.3 million the previous year, driven by airtime, which raked in $154.7 million; data ($99.47 million) and Airtel Money ($49.48 million).

Airtel Uganda’s operating expenses dropped to $161.67 million last year, from $166.6 million in 2017, as it cut down on the general administration costs.

The firm also saw a rise in its tower charges to $28.68 million, from $24.24 million in 2017, with its finance costs also rising to $15.4 million last year, from $8.39 million.

The continuous growth in profits has resulted in the stability of the company. “This affirms the company’s ability to run its operations as a going concern,” the Ugandan unit said.

The Rwandan unit saw its loans to its parent firm, Bharti Airtel Rwanda BV, hit $227.07 million, up from $215.48 million in 2017. Even the loan received from its parent firm in India dropped to $14.4 million last year, from $21.4 million in 2017.

But it got a tax waiver on a $6.01 million loan from its parent firm in June last year. It also got a further interest waiver of $2.5 million from its parent firm.

“The $227.07 million loan is unsecured, interest free and repayable by December 31, 2021,” its directors said.

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