Airtel Africa Plc has recalled $505 million bonds and sold off telecommunication towers in Malawi, Madagascar, and Tanzania for a total consideration of $284 million as part of measures to pay off close to $3 billion debt on its balance sheet that is weighing down its continental operations.
By recalling a bond, a firm pays off the principal amount and the interest of a debt instrument before the due or maturity date. This occurs when the issuer (borrower) intends to clear the debt from its books and save on the regular interest payments.
The telco, a subsidiary of India’s Bharti Airtel Ltd, which has operations in 14 African countries, redeemed the bonds that were to mature in March 2023 saving $26 million on interest payments from the early redemption.
“In line with our strategy to continue to reduce foreign currency debt at holding company, we also repaid $505 million bonds in March 2022, a year earlier than their March 2023 redemption date,” the company says in its financial statements for the year ended March 31, 2022.
“Our balance sheet has also been further de-risked by continued localization of our debt into the operating companies (OpCos) and material debt reduction in Holding Company (HoldCo).”
Following the early repayment of the bonds priced at 5.125 percent, the Group now has only $1 billion of bonds remaining at the Holding Company level that are due in May 2024.
In 2019, the telco raised $750 million through an initial public offering (IPO) and used the net proceeds from the issue of new shares to retire part of the $4 billion debt. “Over this period the Group has reduced its debt by $1.7 billion and improved its leverage ratio to 1.3x net debt to underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) at March 31, 2022.”
The Group completed the sale of more than 2,600 telecommunication towers in Tanzania, Madagascar, and Malawi generating total proceeds of $284 million which were used to partly reduce its debt to $2.9 billion from $3.5 billion.
Tower sale proceeds were: Tanzania ($177 million), Malawi ($55m), and Madagascar ($52m).
The Group recorded a gain of $111 million from the tower sales but the loss of tower sharing revenue as a result of the sale of these towers amounted to $29 million per annum.
The Group which has 128.4 million customers is looking to sell more shares to the public through an IPO in three years and sell more telecommunication towers in Chad and Gabon. In March 2021, the Group announced a memorandum of understanding arrangements with Helios Towers for the potential sale of its tower assets in Chad and Gabon.
In February 2022, Airtel Africa announced it had agreed to an extension to its memorandum of understanding with Helios Towers in Gabon, with completion still subject to Helios Towers obtaining a passive infrastructure license.
The MoU relating to tower assets in Chad expired in February 2022, and Airtel Africa and Helios Towers mutually agreed that this would not be renewed.
The Group’s net profit for the year increased by 82 percent to $755 million from $415 million last year.
The Group’s total revenues increased by 21 percent to $4.71 billion from $3.88 billion with voice, data, and mobile money contributing 50 percent, 32.3 percent, and 11.7 percent to the overall top-line respectively
Its operating cash flow increased by 40 percent to $1.65 billion from $1.17 billion while finance costs declined five percent to $403 million from $423 million in the same period.
Nigeria’s operations contributed 39.8 percent ($1.87 billion) to the overall Group revenue, followed by East Africa which has 57.2 million customers at 36.4 percent ($1.71 billion) while Francophone Africa contributed 24 percent ($1.13 billion).
On March 7, Airtel Africa announced that its Kenya subsidiary, Airtel Kenya Networks Ltd had entered into agreements with the Communications Authority of Kenya regarding its operating and spectrum licenses, and received approval for the replacement of its temporary license with a 10-year frequency license for 2×10 MHz of spectrum in the 2100 MHz Band.
In respect of agreements regarding 2015-2025 operating and spectrum licenses, Airtel Kenya will pay a total of $20 million in four installments over the next three years while with respect to the 2×10 MHz license (2022-32), Airtel Kenya has agreed and paid for a 10-year license for $10 million.
“This $30 million investment reflects our continued confidence in the tremendous opportunity inherent in the Kenya market,” the telco said.