Cloud hangs over Airtel IPO

Dar es Salaam. Airtel’s planned initial public offering (IPO) may take longer as the company’s performance continues to leave a lot to be desired.

In its current financial position, it may be difficult for the company to attract investors during the IPO process as financial results show that it is a loss-making entity.

The recently released Bhati Airtel Annual Report for 2017 shows that the company, which is owned by the Government of Tanzania and Bhati Airtel, was still suffering from accumulated losses.

Besides, floating shares at the DSE Main Market Segment (MMS) requires a prospective company to have at least profit records of not less than three consecutive years.

On the contrary, the Bharti Airtel Annual Report for 2017 shows that Airtel Tanzania has only managed to cut its annual losses to $48.06 million last year, down from $56.4 million in 2016.

Cumulatively, the company has recorded losses amounting to $423.18 million as of 2017 from $357 million recorded during the previous year.

However, the regulator has confirmed that profit and loss are not the only criteria for entering the MMS.

“Profitability is not the only criterion for the company to list shares at the stock exchange,” said Mr Charles Shirima, the Capital Markets and Securities Authority (CMSA) public relations manager.

He said the loss-making company can also be allowed to float its initial shares offer as far as it has promised not to pay dividends for the first two or three years.

Bhati Airtel East Africa regional performance has shown that Airtel Tanzania, which is the country’s second largest telecommunications firm, saw its revenue drop to $214.49 million last year from $228.02 million in 2016.

“The operations of the company continue to depend heavily on financing from its direct and indirect parent companies,” says the report.

The company’s voice revenue dropped to $82.9 million last year from $102.6 million in 2016. Roaming revenue dropped to $5.25 million from $6.23 million.

The report has confirmed that Airtel Tanzania’s liabilities now exceed its assets, casting doubt on whether it will whet the appetite of investors should its initial public offering request be approved.

As the firm’s liabilities of $635.38 million exceed its $233.96 million in assets, the company plans to raise $11.02 million, through an IPO, which is way below the $291 million its competitor Vodacom raised last year at the DSE.

“Going forward, the management hopes to obtain funds from third parties, meet subscriber number and revenue targets,” the firm said, adding that it has obtained a commitment from its major shareholder for a financial injection into it.

The firm last year also embarked on a network modernisation exercise that saw it incur costs of $4.58 million, with $555,319 going to the project and $4.02 million being accelerated depreciation of the replaced old equipment.

Airtel Tanzania’s total borrowing rose marginally to $477.37 million, up from $449.07 million. According to its results, the firm paid the Tanzanian government $655,779 in taxes, $51.6 million being capital expenditure. Airtel Tanzania’s net asset value is currently estimated at around $44.17 million.