Is it Time for Airtel to Exit the African Market altogether?


#1

Last week, Orange announced it was buying Bharti Airtel operations in Burkina Faso and Sierra Leone. The sale of the two operations followed months of negotiations where France Telekom Orange is seeking to increase its footprint in the African market to 20 countries, with Francophone nations as the main targets. (Orange is offloading its 70% stake in Telekom Kenya to Helios Investment Partners). Airtel is set to receive $900 Million from the sale according to S&P

Africa:
Bharti Airtel entered the African market in 2010 with the $9 billion purchase of Zain operations in 15 countries. Airtel had previously sought to enter the market three times via a merger with MTN Group. Airtel sought to replicate its successful model in India, Sri Lanka and Bangladesh which focused on grabbing subscriber market share then penetrating the market.This model failed to kick-off. Airtel has not been able to get a return on its investment in the African market, with the market often driving the overall performance of Bharti Airtel down.

In 2015, rumors emerged of a planned exit of the African market after the Telco put up its subsidiaries in
Burkina Faso, Chad, Congo Brazzaville and Sierra Leone on sale. Airtel denied the rumors stating in its argument,that the subsidiaries represented a relatively small percentage of its overall Africa business. A sale, it said, would help it “establish a sharper focus” on the remaining countries.

In its entry to the market, Airtel set a target of $5Billion in revenues, EBITDA of $2 Billion and a subscriber base of 100 Million by 2013. Its not been rosy. As of March 2015, Airtel had a net loss of $585 Million out of the $ 4.4Billion the Telco made in its African operations. Its subscriber base was 76 Million with expenditure of over $5 Billion. Bharti Airtel has a debt of $10.7 Billion fueled by purchase of African operations and the sale of these operations point at deleveraging efforts. The company has already selling its towers in six African countries stating this will reduce its debt by 9%.

There are other pointers of an imminent exit of the African market. Airtel Kenya recently shed 60 jobs in Kenya as part of a restructuring effort, which will see some departments merge. “The company said that the retrenchment was necessary since the telecom firm had to realign its structure with its operating model”. However, there is talk that Airtel is looking to offload its Kenyan operations to Tigo. According to the Nairobi Tech, contractors, suppliers and partners are said to be repositioning themselves as it becomes imminent that the Telco could be exiting with service providers cutting costs associated with the Airtel Kenya account.

Where did they get it wrong?

Airtel enjoyed market leadership in 10 of the 17 markets in which, it had a presence in. My guess, is the replication of the model they used in Asian markets here. It did not work so well. Airtel was not able to amass as many customers as it planned, and while it almost doubled subscriber numbers, there was no real value to keep them locked to their network (case in point, Kenya). In 2013, Airtel sought to change this by increasing the Average Revenue Per User (ARPU) but I think it was 3 years late.If Airtel ventured into the African market and focused on the 42 Million customers Zain had, offered attractive value packages for services like data and Mobile money, it might have been a different game, different story altogether.
Time to abandon ship.


#2

All Airtel has done so far is do what other mobile carriers are doing at a lower price.
If they innovate and make the next MPesa, they’ll surely start bumping up profits again and then there will be no need to exit the African Market.


#3

On the local Kenyan scene. Making money when you are not Safaricom as a telco is pretty much next to impossible. The problem with Airtel and Orange is rather than innovating, they think that offering services at a cheaper cost to the consumer is what is going to get them customers which is dead wrong.

Safaricom is a leader because it has innovated more than any other Telco locally especially that now they are on almost all businesses. Call & SMS, Mobile Money thorugh MPESA, Mshwari, hosting etc. As a cable ISP which they are doing a successful trial in Nyayo estate on cable connection like Zuku and a plethora of other things.

This is not counting the MPESA API which banks and other financial services have been using to disburse money to users not withstanding that the API implementation was and is very shitty but that is an argument for another day.

Airtel and Orange are always going to be underdogs if ther strategy is to play catch up all along. If they are not going to start innovating and trying out new ideas they will continue getting fucked and making losses. It is time they stepped up the game.


#4

Interestingly you forget the Kenyan government too has an hand in Airtel’s failure, The government has just deliberately blocked Airtel from it’s e-Citizen payment services this has also had an impact on Airtel’s performance. Give Airtel the same support the gov’t gives safaricom & see it by bass it it’s only that most Kenyans are compelled to use safcom due to important payment services to the government if not everyone out here complains safaricom steals from them & I guess no one would want to stay where they are robbed.


#5

This is proving to be very interesting to watch, now with Airtel sending mixed signals. There has been talk of them exiting the Kenyan market as a result of a bad business run. Something that was followed by a rumour that Equity Bank’s James Mwangi was interested in buying it’s Kenya operations ( they deny this, I checked with them). Now Airtel is ready to trial 4G in Kenya, in the coming week
Now where the mixed signals come out much more clearly is when we hear reports that Airtel not only intends to exit the Kenyan market, but 13 African countries.

Now if the exit is true, then their going into 4G would mean they are trying to make the sale attract better figures.


#6

Airtel dont seem to see where the next opportunity is…they need to look at the numbers,lots of smartphones locally have wifi capability…data is the next platform,what Airtel needs to do is focus on growing data revenues. build marketshare through data…they should have already started a fibre to the home initiative or massive wifi networks…4G will not save them now,safaricom have the infrastructure and capability to destroy them already.Airtel needs a different tact locally and getting former safcom execs will not help them.The MVNO move is great but they need to expand quickly…the Kenyan Govt may not be on their side but they can still IPO Airtel Kenya maybe sell 40% in the NSE that will endear them to the public and lobby some govt support,maybe even make their exit easier.


#7

Airtel needs to learn from what is happening in their home market. Like most of you have pointed out data is where the opportunity is.

I want to see airtel exit the market. We need a company that has the financial muscle to compete. Airtel wants the ca to fight its battle. The company wants to live off regulatory handouts. In my opinion the regulator should only step in to address abuse of a market leadership position. The funny thing is that even when the ca acts, airtel doesn’t take advantage of it: case in point opening of the agency networks.

It’s a win for everyone if we get a more capable competitor. We need a “reliance jio” in kenya.


#8

It wouldn’t make sense for equity bank to buy Airtel. The MVNO model works for them. Also, I wouldn’t want to see them buy Airtel.


#9

I’m saying a big YES to this just because I badly need the free data Jio is giving away in India :slight_smile: