Bharti Airtel enters into exclusive talks for sale of 4 African units to Orange
Orange said that the agreement covered Bharti Airtel’s subsidiaries in Burkina Faso, Chad, Congo Brazzaville and Sierra Leone.
NEW DELHI: Bharti Airtel BSE 3.68 % is in exclusive talks to sell four of its African subsidiaries to France’s Orange SA which may net the world’s third-largest telco around $1 billion (Rs 6,400 crore).
Airtel is looking to sell its operations in Burkina Faso, Chad, Congo Brazzaville and Sierra Leone, all Francophone countries, or non-English speaking markets in Africa, a continent where the company has been making losses since its entry in 2010 which has been dragging the carrier’s consolidated financials. Sources say Airtel is looking for a valuation between $900 million and $1 billion for the sale.
The four countries in question roughly contributed about $650-660 million to Airtel Africa’s top line of $4.71 billion as of Marchend. Earnings before interest, taxes, depreciation & amortization (EBITDA) for the four countries was close to $180 million in the period.
“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,” a statement issued by Bharti said late on Monday.
However, the statement added that these were only negotiations and there was “no certainty” of any binding agreement as a result of these discussions. It didn’t provide any further details. Africa has long been a drag on Bharti’s overall performance, often offsetting the healthy growth numbers the company registered in its Indian operations.
Airtel’s net loss in Africa for the fiscal fourth quarter of the year ended March 2015 widened to $183 million (Rs 1,155.7 crore) from $105 million (Rs 663.1 crore) a year back, hurt by forex losses.
The company’s Africa revenue had dropped by 12.6% in the quarter ended March 2015 over last year to $1 billion, from $1.14 billion in the same quarter last year. The growth was limited by currency depreciation of 18.4%, in reported currency terms. The company has 76.3 million subscribers in Africa that grew 9.8% year on year.
Airtel had purchased Kuwait-based Zain Telecom’s African operations across 17 countries for $10.7 billion, a sum many said was hefty for the lossmaking operations. The company has been unable to turn around operations in Africa despite appointing a new Africa head, Christian De Faria, last year.
Airtel in February had denied any talks with Orange over any potential sale. Orange, formerly known as France Telecom, recorded revenue of 39 billion euros in 2014. With operations in 29 countries, it reported a total customer base of 247 million worldwide by March 31, 2015, including 188 million mobile customers and 16 million fixed broadband customers. Sources say Orange will be more interested in the francophone operations of Bharti, and not the East African ones.
Bharti has been performing well in the francophone countries. Analysts have been scathing about Bharti’s inability to turn around its African operations after over four years of operations. Critics have often blamed the Bharti management’s efforts to replicate its India strategy of low tariffs and high volumes for the debacle in Africa.
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