The Tanzanian unit of Indian telecommunications giant, Bharti Airtel, which has submitted its prospectus to the capital markets regulator for a possible listing at the Dar es Salaam Stock Exchange (DSE), is technically insolvent. Airtel Tanzania’s liabilities now exceed its assets.
Last year, Tanzania’s second largest telecommunications firm posted a loss of Sh5.8 billion ($56.4 million), with liabilities of Sh61.1 billion ($665.8 million) against assets of Sh30.9 billion ($299.5 million).
The firm now expects to raise Sh1.1 billion ($11.02 million) through an IPO, which is way below the Sh30 billion ($291) million its main competitor Vodacom managed to raise last month, which saw South African pension fund pic buy shares worth Sh8.3 billion ($80 million).
“Airtel’s misfortunes in the region is that it has changed hands almost three times over the past 15 years which has seen it impact negatively on its subsidiaries balance sheet.
“What we have seen is that with each acquisition, there is new capital injection, which increases the firm’s debt levels outside of the inherited debts.
“I am certain that the Tanzanian unit are now repaying quite a bit to the parent firm in Delhi from the various capital injections it has been receiving,” an analyst told The EastAfrican.
According to its results, the firm paid the Tanzanian government Sh67.7 million ($655,779) in taxes, Sh5.2 billion ($51.6 million) being capital expenditure. Airtel Tanzania’s net asset value (NAV) is currently estimated at around Sh4.5 billion ($44.17 million).
Its financial report for last year shows that the regional units, are bleeding funds, which saw its Kenyan, Rwandan and Tanzania units post a combined loss of Sh19 billion ($181.2 million), even as only their Ugandan unit returned a profit of Sh4.5 billion ($44.9 million).
The annual financial report, which The EastAfrican has seen, has for the first time made public the company’s financial wellbeing, showing that the telecommunications firm is still struggling to find its footing in the region, where Vodacom has now become a dominant player.
The Kenyan unit posted a Sh8 billion ($79.4 million) loss last year, after its last years current liabilities of Sh54.4 billion ($527.9 million) exceeded its current assets of Sh9.5 billion ($92.6 million). The Kenyan firm ended the year with a total debt load of Sh44.3 billion ($429.62 million).
“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,” says a note by its auditors Ernst & Young accompanying the statements.
Airtel Kenya’s shareholder loans also rose to Sh37 billion ($358.9 million) last year, up from Sh30 billion ($299.7 million) in 2015, accounting for 68 per cent of the company’s total current liabilities. It also saw its revenues shrink marginally to Sh16.6 billion ($161.5 million) in 2016 from about Sh17 billion ($169.2 million) the previous year.
This performance is a pale shadow of one of its fiercest competitors and Kenyan telecommunications market leader, Safaricom, which posted Sh210 billion ($2.03 billion) in total revenues and a Sh47.7 billion ($462.4 million) in profit after tax for the year to March 2017.
The Rwandan unit saw a loss of Sh4.5 billion ($44.4 million) even as the auditors cast doubt on its financial health, noting that it was also a going concern. It saw its revenues increase to Sh2.7 billion ($21.69) million last year, up from Sh20.7 billion ($19.9 million).
However, it is the operating expenses and currency losses of Sh4.1 billion ($40.4 million) that pushed it to negative territory.
“The operations of the company continue to heavily depend heavily on the sources of financing from its direct and indirect parent company sources.
“However, the management is banking on raising money from meeting the projected operations targets, third parties and shareholders to boost its position. The directors remain confident that these sources of funding will come through,” the auditors said in the opinion of the Rwandan unit.
In Uganda, the Indian teleco’s books were positive, buoyed by its rising market share, even as its competitor MTN controls 54.7 per cent of the market. Its Sh50.1 billion ($44.9 million) profit was buoyed by the rising revenues that stood at Sh29.2 billion ($283.4 million), up from Sh23.9 billion ($232.1 million).
The Kampala headquartered subsidiary, however, saw its operating expenses rise to $189.74 million, up from $165.8 million in 2015.
Last year, it reduced its finance cost by two-thirds to settle at about Sh2.1 billion ($20.8 million), up from about Sh6.6 billion $63.9 million.
The Ugandan Revenue Authority earned Sh1.7 billion ($16.7 million) from the firm as tax.
“The continuous growth in profits has resulted in the independent stability of the company. This affirms the company ability to run its operations as a going concern,” the auditors said of the Ugandan unit.