Bharti Airtel Plans London IPO for Africa Unit to Cut Debt
Airtel Africa also considering a listing in Nigeria.
(Bloomberg) -- Bharti Airtel Ltd. is planning a share sale for its Africa unit in London as part of a push by the Indian wireless operator to cut a debt load that’s ballooned to more than $16 billion.
The initial public offering by Airtel Africa Ltd. would comprise new shares and the sale would seek a free float of at least 25%, the company said in a filing on Tuesday. Airtel is Africa’s second-largest mobile operator behind Johannesburg-based MTN Group Ltd. with almost 100 million subscribers across 14 countries including Nigeria, Kenya and Tanzania.
Bharti Airtel, controlled by tycoon Sunil Mittal, is fighting a costly war in India with billionaire Mukesh Ambani’s upstart Reliance Jio Infocomm Ltd. Airtel’s earnings have shrunk and debt soared since Reliance Jio stormed the Indian market in 2016 with free calls and cheap data. The New Delhi-based company is counting on some asset sales, a rights issue and lately the Africa unit’s London IPO to bolster its finances.
“The main motivation is the debt level at the parent,” said John Davies, an analyst at Bloomberg Intelligence. The “rights issue, talk of selling towers plus this IPO are all consequences of that.”
Shares of Airtel Africa could start trading on the London Stock Exchange in June in a deal that could raise about $1 billion, people familiar with the matter said earlier this month. Airtel Africa already raised $1.25 billion last year from investors including Temasek Holdings Pte and SoftBank Group Corp., giving it an equity value of about $4.4 billion.
A successful IPO will help the company kickstart a “stronger growth phase” in Africa, Bharti Airtel Chief Executive Officer Raghunath Mandava said on a call with reporters. The continent’s youthful population and potential for more high-speed 4G capacity make it a big opportunity for expansion, he said.
Africa Airtel will also seek to lure investors with the potential of its mobile-money offering, which has 14.2 million customers. Wireless operators on the continent are investing heavily in mobile-payment services to meet high demand from customers where formal banking infrastructure is scarce, such as in Nigeria, Kenya and Ghana.
The company will also consider a local listing in Nigeria, according to the IPO filing. That would follow in the footsteps of market-leader MTN, which listed stock in Lagos earlier this month to meet demand from regulators and local investors. Airtel is the second-biggest carrier in Nigeria, Africa’s most populous country, and the market makes up more than a third of overall revenue.
Bharti Airtel has been struggling to add subscribers in a saturated Indian market amid a tariff war, and has used one-time gains to shore up its profits for at least four quarters in a row. The entry of Jio knocked Airtel from its perch in a consolidation that shrank the number of Indian operators to three players from about a dozen four years ago.
In February, Airtel unveiled plans to raise as much as 320 billion rupees for a war chest to take on Jio as well as to prepare for an impending 5G airwaves auction. Of that, it raised about 250 billion rupees this month from a rights issue.
JP Morgan Securities Plc is sole sponsor for the planned sale by Airtel Africa, according to the statement. BofA Merrill Lynch, Citigroup and JP Morgan are joint global coordinators and bookrunners.
To contact the reporters on this story: P R Sanjai in Mumbai at psanjai@bloomberg.net;Loni Prinsloo in Johannesburg at lprinsloo3@bloomberg.net
To contact the editors responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net, ;Rebecca Penty at rpenty@bloomberg.net, John Bowker
©2019 Bloomberg L.P.