Airtel on Tuesday said that it will stay invested in Africa and the sale of business in four countries will help it to focus on operations in the rest of the continent.
“Airtel is well-positioned in the remaining countries and there is significant growth upside available. We remain fully committed to our Africa operations and have no plan to exit,” an Airtel spokesperson said, replying to a question from BusinessLine .
On Monday, Airtel had announced talks with French telecom major Orange to sell operations in Burkina Faso, Chad, Congo Brazzaville and Sierra Leone.
According to a Bank of America-Merrill Lynch report, these four markets contributed 14.5 per cent of total African revenues and generated $23 million profit in FY14, compared to a total Africa loss of $ 329 million.
Airtel is among the top 2 operators in each of the four markets. While the company did not disclose the possible sale value, analysts estimated the total transaction value to be between $680 million and $1.4 billion.
“Given the demand for profitable assets, any potential selloff in these profitable assets will increase the African losses. Having said that, we see it as directionally positive, that Bharti is looking to exit these markets. In our view, a successful exit may lead to a rerating of the Bharti Airtel stock, as its net debt will improve,” the report said.
No exit But an Airtel spokesperson said that the intended sale does not mean the company was exiting Africa. “Airtel has invested in these four countries. Since Orange is not present in these markets, our operations are a natural fit for them – strategically and culturally – while this transaction enhances the value for our shareholders,” the spokesperson said.
“We believe that the proposed transaction, along with our recent strategic divestment of towers, will help us establish a sharper focus on the remaining countries, significantly reduce the debt and thereby give a boost to our aim of achieving net profit and free cash flow in Africa at the earliest,” he added.
Bharti has been struggling with its Africa operations with declining EBITDA margins, rising capex, sluggish top-line growth, and depreciation of currencies.
The company has been unable to turn around the operations after acquiring it from Zain in 2010.