Bharti Airtel today said it is in talks with Orange to sell subsidiaries — Burkina Faso, Chad, Congo Brazzaville and Sierra Leone — in Africa.
The huge debt of $10.67 billion and some of the delayed divestment deals are prompting Bharti Airtel to look for a buyer for its African telecom business. Investment in Africa was part of its strategy to expand presence in emerging telecom markets. The same strategy was followed by its rival Vodafone under the then CEO Arun Sarin.
“Orange and Airtel have entered into an exclusive agreement to explore the possible acquisition by Orange of Airtel’s subsidiaries in Burkina Faso, Chad, Congo Brazzaville and Sierra Leone. There is no certainty of any binding agreement as a result of these discussions,” said Airtel in a statement issued in India.
In 2010, Bharti Airtel entered the African telecom market through the acquisition of Zain.
Airtel, a telecom operator promoted by SingTel and Bharti Enterprises, is present in 17 countries across Africa, namely: Nigeria, Burkina Faso, Chad, Congo B, Democratic Republic of Congo, Gabon, Madagascar, Niger, Ghana, Kenya, Malawi, Seychelles, Sierra Leone, Tanzania, Uganda, Zambia and Rwanda.
Bharti Airtel had over 328 million customers across its operations at the end of May 2015. Orange had 247 million telecom user base as of March 2015.
Zain deal: a thorn in Airtel crown?
With the $10.7 billion acquisition of Zain Africa’s mobile operations in 15 countries in Africa with more than 42 million customers, Airtel became the become world’s fifth largest wireless company in March 2010. This year, Airtel announced that it has become the third largest telecom operator in the world.
In March 2010, Sunil Mittal, chairman and managing director of Bharti Airtel, said that the deal with Zain was a landmark for the global telecom industry and game changer for Bharti. “With this acquisition, Bharti Airtel will be transformed into a global telecom company with operations across 18 countries fulfilling our vision of building a world-class multinational,” Mittal said.
Airtel Africa has clocked $1,177 million revenue with EBITDA of $257 million in the March 2015 quarter. In fiscal 2015, Airtel Africa posted $4,709 million revenues with $1,075 million EBITDA.
The telecom service provider has 76.3 million customers in Africa. Airtel Africa generated 31,045 million minutes from mobile services. Airtel Africa boasts a total ARPU of $4.4 and data ARPU of $1.3. Its non-voice revenue is 25.2 percent of mobile services revenue. Airtel’s data customers stood at 30,379,000 in Africa.
Airtel has made a cumulative investment of $10,889 million in Africa. The company recent Capex (capital spending) in African telecom market was $364 million. Airtel Africa has 18,819 telecom sites and out of this, 10,011 are 3G sites.
Total minutes on the network during the fiscal year 2015 increased 7.6 percent to 118.6 billion as compared to 110.2 billion in the previous year. Its 30.4 million data customers accounted for 39.8 percent of the total customer base as compared to 32.1 percent in the previous year.
Data traffic almost doubled to 35.3 billion MBs from 18.9 billion MBs in previous year with usage per customer increasing from 89 MBs to 114 MBs. Voice realisation per minute declined from 3.30 cents to 2.84 cents for the full year. ARPU in Africa declined from $ 5.6 to $ 5.1.
Debt was one of the main reasons for planning to divest telecom assets in Africa. Net debt of Bharti Airtel in March 31, 2015 increased by $606 million to $10,679 million from $10,074 million last fiscal year.
Though Bharti Airtel entered into agreements with Helios Towers Africa (HTA) for divestment of over 3,100 telecom towers in four countries across Africa, they could not go ahead with the deal.
BAIN also entered into agreements with Eaton Towers (Eaton) for divestment of over 3,500 telecom towers in six countries across Africa. Airtel Nigeria and American Towers (ATC) have entered into an agreement for sale of over 4,800 telecom towers in Nigeria.
Its subsidiaries in Zambia and Rwanda have entered into agreements with IHS Zambia and IHS Rwanda for sale of over 1,100 telecom towers in these two countries.
Orange, which has clocked 39 billion euros revenue in 2014, has customer base of 247 million at 31 March 2015, including 188 million mobile customers and 16 million fixed broadband customers in 29 countries. The main benefit to Orange will be the new telecom network and high spending customer base of Bharti Airtel.