Bharti Airtel to cede at least 20 per cent of its stake in Airtel Kenya to local investors before planned full exit

Bharti Airtel will cede at least 20 per cent of its stake in Airtel Kenya to local investors before a planned full exit from the country as part of strict conditions by the industry regulator.

Bharti Chairman Sunil Mittal last week told the Indian media that the company plans to exit Kenya, Rwanda, and Tanzanian and was currently in active discussions exploring a mix of intra-country sale, purchase, or merger.

The Communications Authority of Kenya (CA), however, said the Indian-based telecommunication giant had yet to formally inform the regulators in Kenya of its plans to exit the regional markets.

“Airtel has not shared with us any intention to exit the market but if they want to exit there are several processes spelt out in the regulations that they can follow,” CA Director-General Francis Wangusi told The Standard yesterday.

“We do not have any restrictions as long as all the laid down provisions are followed,” he added. “In the first place, if they are selling to foreign investors they will need to ensure at least 20 per cent of the shares remain locally.”

Offset debt

Mr Wangusi said the company would also need to offset all accrued debts and licence fees before the exit can be approved.

The sale of Airtel’s loss-making East African subsidiaries would free up much needed liquidity and boost margins even as the telco angles for the more lucrative and relatively untapped West African markets.

In August, Airtel Kenya posted its financial information for the first time, revealing the extent of the debt stock held by the struggling telco.

According to the report, current liabilities in Airtel Kenya stood at Sh55 billion against current assets of Sh9.7 billion as at December 2016, making the company’s local operations technically insolvent.

Data from the CA sector statistics indicates that Airtel’s market share shrunk three per cent in the last quarter with total subscribers currently standing at 6.1 million as at June 30, 2017.

The company saw a 25 per cent increase in the volume of voice traffic which rose from 1.2 billion minutes recorded in the previous quarter to 1.5 billion in June.

Opt to leave

Should Airtel opt to leave, Kenya’s mobile services market will be left to Safaricom, currently holding a 77 per cent market share, and Telkom, a distant third holding seven per cent of the market with just 2.8 million subscribers.

The exit plan comes a few months after state-run Telkom dropped the Orange brand name following France Telecom’s sale of the 70 per cent controlling stake it held in the firm to UK private equity firm Helios Investment Partners.

Airtel Kenya’s woes have been compounded by a protracted court case where it is seeking to stop the Government from collecting Sh2 billion in spectrum fees.

Its precarious financial position has led analysts to speculate whether the company will remain solvent should the court rule against it. The case is set for determination on Monday.