Airtel's plan to list Africa business to help in fight against Jio

Bharti Airtel's plan to list BAIN, the holding company that controls Africa operations, will be a big positive for country's largest telecom player and makes strategic sense, according to analysts.

Though the discussions regarding the listing of Bharti Airtel International (Netherlands) BV (BAIN) are at an exploratory/preliminary stage and there is no certainty of any final decision or outcome, Bharti Airtel has said.

On Wednesday, the Sunil Mittal-led company had said the Board of BAIN, which is the holding company of Airtel Africa, has authorised the management to begin non-binding exploratory discussions with banks and intermediaries to evaluate the possibility of a public listing.

In 2010, the company made its foray into the African market after the acquisition of Zain Telecom's operations. The operations of Airtel's African business, which had been a drag to its numbers, have started showing green shoots.

The Africa business is in a resurgent mode with significant margin expansion and profit consistency over the last four quarters and BAIN's listing should open up many options for financing its future growth, which will enhance the growth visibility, PhillipCapital said in an analyst report.

"The listing of its African operations will provide Bharti with the options to monetise operations. The long-term outlook for its Indian operations is very bright, but near-term challenges -- shrinking Ebitda (earnings before interest, taxes, depreciation and amortisation) and financing growth -- have cropped up. Its ability to monetise its African operations would not only provide the company with a significant war chest but would also send a signal to its competition about its ability to sustain low tariffs for longer periods – this, in turn, should stabilise the market faster," the report said.

Bharti Airtel, along with other incumbents, is locked in a fierce competition with Reliance Jio in India over data tariffs. The entry of Jio has shaken the telecom market with free voice calls and dirt cheap data tariffs.

Another analyst report by BNP Paribas said Airtel could adopt the same strategy that it has for Bharti Infratel, progressively reducing the stake in the business and investing in the core India mobile business.

"Airtel continues to monetise its non-core assets to invest in its India wireless business, in which it is a market leader and in which we see a significant growth opportunity. It has reduced its stake in Bharti Infratel, sold a stake in its digital TV business, sold its towers in Africa and is now considering reducing stake in Africa business through listing," it said.

Indian telecom industry is consolidating into a three-player market and Airtel seems well-positioned to benefit from it. This will require a sizable network investment in the short-term, which is likely to be funded by the asset monetisation initiatives.

Bharti operates in 14 countries across Africa and has about 84.13 million subscribers as of December 2017. For the third quarter, the net income for Africa was $76 million against a loss of $93 million in the corresponding quarter last year. Africa revenues grew 5.3% to $783 million from $744 million in the same period.

The margins for Africa business have also improved. In Africa, the focus is on 3G, 4G data and m-commerce (Airtel Money) to boost its growth. To cut down cost, the company has already started selling tower assets in Africa.

GREENSHOOTS EMERGE

• Africa business has shown significant margin expansion and profit consistency over the last four quarters
   
• For the third quarter, the net income for Africa was $76 million against a loss of $93 million a year ago