Indian telco urged to exit Kenya and others to focus on Nigeria

The exit of Bharti Airtel from Kenya,Rwanda and Tanzania could save the Indian telecom giant and boost its margins in Africa according to market analysts and brokerage firm, Goldman Sachs.

According to the analysis published by the Economic Times of India, the exit from East Africa and the monetisation of tower assets in five other non-profitable markets would help the company boost margin and reduce leverage.

Airtel has been exploring strategic exits from Africa as it looks to focus on its Asian operations and its chairman, Sunil Mittal has already indicated that the company needs to exit the the markets in Kenya,Tanzania and Rwanda which have margins significantly lower than the current Africa average”.This exit will be explored via intra-country sales,purchase or a merger.

In Ghana for instance the company has completed a merger with rival Tigo to create the second largest telco in the West African country.

Separately, analysts said if Airtel’s stated interest in buying 9mobile (formerly, Etisalat Nigeria) – the fourth largest mobile carrier in Nigeria – translates in a deal, it would become the largest telco by subscribers in a market that is Bharti’s largest in Africa and generates 30% of its revenues in the 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.

Mittal had also told ET in a recent interview that Airtel is keen on erstwhile Etisalat Nigeria, which is now called 9mobile, and is up for sale.

At present, Bharti is the third-largest telco in Nigeria with a 25% subscriber market share, while fourth largest, 9mobile has 12%. If Airtel were to acquire 9mobile, its customer market share at 37% would be a tad higher than MTN’s 36%.

According to analysts, although the Africa operation has historically been a drag on Bharti Airtel, over the past 3-4 years, the Sunil Mittal-led telco has divested $3.3 billion worth of assets, “which has helped reduce Africa debt levels by as much 40%.

In fact, a combination of debt reduction and improving Ebitda margins, they said, helped Airtel’s Africa business turn net profit positive in the first quarter of FY18. In September quarter, the telco 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 consumption, and stringent cost controls.