Airtel’s Africa unit is now a nearly-billion dollar business where every user pays 40% more than the one in India

Bharti Airtel founder Sunil MittalBCCL
  • Five months ago, there was a question on whether the Africa unit will survive.
  • However, the London-listed company has clocked a revenue growth of over 10% for nine quarters now, reaching nearly $900 million at the end of March.
  • The average revenue per user in Africa is 40% more compared to India.
  • Here, we decode what is driving the growth in Airtel’s Africa unit and what lies in its future ahead.
Five months ago, Airtel was wondering whether the Africa business was viable at all. Now, it has posted a 72% jump in pre-tax profit and is planning to invest another $700 million capital expenditure in the continent.

There's a good reason why telecom tycoon Sunil Mittal— worth over $11 billion as per Forbes⁠— is backing his instincts in Africa.

At nearly $900 million in the latest third quarter, the Africa unit’s revenue is nearly a fourth compared to India business; though analysts at Edelweiss have ascribed about 10% of the Airtel share price in India as value of the company’s stake in the Africa business.


The rate of subscriber addition in Africa has increased from 1.9 million at the March 2019 to consistently over 3 million in each of the last three quarters.

Airtel Africa Subscriber and ARPU growthAirtel Africa, I-Sec research

“The last 12 months have been good for us. Our revenue growth has been about 13.8%, we’ve increased our EBITDA margins to 44.3% and our free cash flows have doubled this year to $453 million. We have enough finances to tide over this COVID-19 period,” Raghunath Mandava, CEO of Airtel Africa told CNBC Africa.

EBITDA stands for earnings before interest, tax, depreciation, and amortisation and it is a metric to measure the strength of the company’s core business.

Airtel Africa revenue and profits in the last five quartersAirtel Africa

The reason for doubt in the last one year

Airtel’s Africa unit got listed in the London Stock Exchange in June 2019 and it got a disastrous welcome, falling over 16% on day one. Investors didn’t like the prospects much and, as expected, profit fell in three out of the last five quarters.


However, the fall in profit was primarily due to currency devaluation in important markets like Nigeria, which makes for 40% of the telecom operator’s annual revenue in Africa. The company lost nearly 9% of the revenue to the exchange rate loss, according to an Emkay Research report dated May 19.

Airtel Africa’s ARPU is 40% higher than it is in India

Another surprising statistic revealed in the latest Edelweiss report is that Airtel average revenue per user (ARPU) in Africa is ₹210, nearly 40% higher than the ₹154 it makes from the Indian users.

Airtel Africa and India ARPU comparisonAirtel, I-Sec research


And there’s headroom for growth too...

It is worth highlighting that out of the 110 million subscribers of Airtel Africa in Q4 2020, only 35 million used data services. “The way Africa is now, we have unique customer penetration of 45%, smartphone penetration is between 35-40%. That means there is potential to grow voice, data and because of lower banking penetration, there is enough potential to grow mobile money,” Mandava further added, highlighting the growth potential in Africa.

Analysts are bullish on the Airtel stock

Airtel has been on a rally of late with its stock increasing by 20% in the last one month. On one hand, the India business is narrowing down to a duopoly between Airtel and Reliance Jio [can hyperlink to one of BI’s stories on this] and on the other hand, the revival in Africa business has impressed analysts.

Looking at its Q4 2020 performance, analysts have revised their target price for Airtel stock listed in India to as high as ₹712, another 20% from the compared to the closing price on May 22.

“The company’s ability to garner smartphone subscribers will aid revenue market share as this segment has the highest propensity to pay and would benefit operators the most should tariffs rise or the industry consolidate,” said Edelweiss research in its latest report dated May 19, 2020.

BrokerageTarget price
CLSA₹ 670
Morgan Stanley₹ 575
Credit Suisse₹ 600
Edelweiss₹ 712
ICICI Securities₹ 655
Emkay₹ 610

Source: Economic Times


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