ADVERTISEMENT

Q2 Results: Bharti Airtel’s Africa Unit Posts Biggest-Ever Operating Profit

Airtel Africa’s operating profit rose 12.4 percent year-on-year to $372 million in July-September period.

An Airtel Africa adveritising hoaring in in N’Djamena, Chad. Growth in the continent has mitigated Airtel’s troubles in the sub-continent. (Photographer: Xaume Olleros/Bloomberg)
An Airtel Africa adveritising hoaring in in N’Djamena, Chad. Growth in the continent has mitigated Airtel’s troubles in the sub-continent. (Photographer: Xaume Olleros/Bloomberg)

Bharti Airtel Ltd.’s Africa unit reported its highest ever operating profit in the quarter ended September because of higher revenue, improved operating leverage and cost cuts.

Operating profit of the continent’s second-largest mobile operator rose 12.4 percent year-on-year to $372 million during the period, according to the company’s statement on its website. Its margins expanded 100 basis points to 44.1 percent.

The Africa unit’s revenue and earnings before interest, tax, depreciation and amortisation, in constant currency terms, rose a little more than 11 percent each during the quarter. Its free cash flow—the cash a company can generate after accounting for capex—jumped nearly twofold to $166 million, aided by a fall in interest payment as debt reduced, lower working capital and a rise in operating profit.

That’s despite a 39 percent increase capital expenditure incurred by the company for network modernisation and rollout of additional sites.

“These figures underline the strength of our ability to consistently deliver growth across voice, data and mobile money,” Raghunath Mandava, chief executive officer at Airtel Africa, said in the statement. “This is the seventh quarter of double-digit growth.”

Airtel Africa’s net debt fell to $3.2 billion from $4 billion in the preceding three months. That’s because proceeds from its initial public offer were used to repay debt. The company mopped up nearly $670 million from investors through its maiden issue. The shares were issued at $1.01 apiece and are trading over 29 percent lower on the London Stock Exchange.

While the Africa unit’s average revenue per user remained flat, its total customer base rose to 103.9 million from 94.1 million last year.

The company’s board also declared an interim dividend of 3 cent apiece.

Goldman Sachs has a ‘buy’ rating on the stock and expects the growth momentum to drive a rerating over the next 12 months. The global research firm also expects the company’s operating profit to grow at an annualised rate of 10 percent over FY19-24.

Bharti Airtel continues to gain footing in Africa even as its India business is under pressure. It has been one of the worst-hit telecom operators since the launch of Mukesh Ambani’s Reliance Jio Infocomm Ltd. The company lost most active subscribers in August as it temporarily shut operations in Jammu & Kashmir during the lockdown and flood in various regions damaged network connectivity. The Sunil Mittal-led telecom service provider has since changed its strategy to focus on fewer, better-paying customers.