Airtel Enters Nigerian Stock Market

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The Nigerian stock market is to witness the listing of Africa’s second largest telecommunications firm, Airtel Africa Plc, after the on-going Initial public offering and listing on the London Stock Exchange, writes Goddy Egene

The Nigerian Stock Exchange (NSE) will soon witness the listing of the second largest telecommunications company in Africa, Airtel Africa Plc less than two months after MTN Nigeria Communications Plc, the largest telco on the continent, got listed on the local bourse.

The NSE on May 16 listed 20.4 billion shares of MTNN at N90 per share, thereby adding about N1.8 trillion to the market capitalisation of the exchange. And the NSE will list the shares of Airtel Africa Plc in July. Unlike MTNN that was listed by way of introduction, Airtel Africa will be listed after an Initial Public Offering (IPO) on the NSE and the London Stock Exchange (LSE). Airtel Africa Plc is currently embarking on a global share offering to raise $750 million from United Kingdom and Nigerian markets.

The Nigerian Offer

Unlike MTNN that did not sell shares to the investing public before being admitted on the exchange, Airtel Africa Plc is making the IPO through a book building process to determine the eventual price and volume of shares to be sold to investors. A book building is a process of price discovery, through which the issuer ascertains the demand for the securities being issued and assesses the price at which such securities may be issued before ultimately determines the quantum of securities to be issued.

Under the book building process, Airtel Africa Plc is eyeing between 501.125 million shares and 716.406 million shares, at price between N363 and N454 per share. The shares are being offered to high networth and institutional investors.

The company is expected to announce the final offer price on June 28, allot the shares to investors on June 29 and list get listed on the NSE on July 4, 2019. It is expected that the mid-point market capitalisation of the offer will be about N1.5 trillion.

Airtel Africa said the price range and the offer share size range is indicative only and may change during the course of the offer, and the offer price may be set within, above or below the price range.

“All ordinary shares subject to the offer will be issued or sold at the offer price, which will be determined by the company, following a book building process and in consultation with the Joint Global Coordinators.

A number of factors will be considered in determining the offer price, the offer share size and the basis of allocation, including the level and nature of demand for the offer shares during the book building process and prevailing market conditions,” the company explained.

The listing on the NSE will be conditional on the listing of LSE, which is expected to take place on July 3, 2019.

“The LSE listing shall not be conditional on NSE listing admission, whereas NSE shall be conditional upon LSE listing. There can be no assurance that LSE listing will occur on the July 4,” the company said.

The Nigerian IPO has Barclays Securities Nigeria Limited and Quantum Zenith Capital & Investments Limited have been appointed Joint Issuing Houses, while Greenwich Securities Limited and Chapel Hill Denham Advisory Limited have been appointed receiving agents.

Purpose of IPO and Listing

The directors of Airtel Africa Plc said offering the shares in Nigeria and listing on the NSE would encourage operational discipline through the establishment of an independent capital structure and governance framework following the successful turnaround of the group’s operations.

“It will also facilitate measurement of the group’s continued positive performance against holistic, publicly disclosed metrics as it enters a strong free cash flow phase; introduce an optimal capital structure and enable improved leverage for greater flexibility in pursuing growth opportunities going forward; and provide access to the capital markets and diversification of the Group’s capital base to support the Group’s continued growth. The company intends to use the net proceeds from the offer principally on the reduction of debt, in particular to achieve a targeted leverage ratio of 2.5x based on underlying earnings before interest, tax, depreciation and amortisation for the year ended 31 March 2019.

Market Share and Performance

Airtel Africa has been offering mobile services in Africa since 2010 and has leveraged this experience to roll out relevant products and services across its footprint. The group offers a range of country specific entertainment, lifestyle and general content through its VAS products. The group aims to continue positioning its non-voice businesses, in particular through its investments in value-added digital services and continued expansion of mobile money services, as an opportunity for long-term sustainable growth in response to the rapidly changing telecommunications environment in the markets in which the group operates.

As at 31 December 2018, Airtel Africa was the second largest mobile operator in Africa by number of active subscribers, according to Ovum. The group’s footprint is well diversified, serving an aggregate of 98.9 million subscribers and 14.2 million mobile money customers across its footprint as at 31 March 2019.

Nigeria represents Airtel Group’s largest single country subscriber base, comprising 37.6 per cent of total subscribers as at 31 March 2019.

About 43.4 per cent of subscribers are in East Africa and the remaining 19.1 per cent in the group’s rest of Africa segment.

In terms of financial performance, as the year ended 31 March 2019, revenue in Nigeria was $1.106 billion (representing 35.9 per cent of the group’s revenue in the year) and underlying earnings before interest, tax, depreciation and amortization (EBITDA) was $550 million. In the year ended 31 March 2019, revenue in East Africa was US$1,102 million (representing 35.8 per cent of the Group’s revenue in the year) and underlying EBITDA was $442 million. Revenue in rest of Africa was $888 million (representing 28.9 per cent of the group’s revenue in the year) and underlying EBITDA was $339 million

A further analysis of the performance showed that revenue grew from $2.884 billion in 2018 to $2.910 billion in 2019. This increase was primarily due to mobile data revenue growth and Airtel Money revenue growth. Profit after tax rose from $142 million to $441 million.

Airtel Africa operates in three main business lines, mobile voice, mobile data and Airtel Money. The mobile voice business line comprises pre- and post-paid wireless voice services, international roaming, fixed-line telephone services and interconnect revenue paid to the group by other telecommunications providers. The mobile voice business line is the largest component of the group’s revenue, representing 62.2 per cent and 66.4 per cent in the years ended 31 March 2019 and 31 March 2018, respectively.

The mobile data business line comprises data communications services, including 2G, 3G and, increasingly, 4G data services, and other VAS for mobile subscribers. The mobile data business line accounted for 22.2 per cent and 18.9 per cent of the group’s revenue in the years ended 31 March 2019 and 31 March 2018, respectively.

On an aggregated basis, the mobile business lines before inter-product elimination and including infrastructure tower sharing income accounted for 94.8 per cent of the group’s consolidated revenue and 92.7 per cent of the group’s underlying EBITDA in the year ended 31 March 2019 and 95.4 per cent of the group’s consolidated revenue and 95.2 per cent underlying EBITDA in the year ended 31 March 2018.

On the other hand, mobile money services, offered under the Airtel Money brand, are an increasingly important part of the group’s service offerings. The Airtel Money business line comprises a mobile commerce service that is accessible 24 hours a day, seven days a week through customers’ mobile devices. The Airtel Money business line before inter-product elimination accounted for 7.6 per cent of the group’s consolidated revenue and 7.3 per cent of the group’s EBITDA in the year ended 31 March 2019 and 5.2 per cent consolidated revenue and 4.1 per cent EBITDA in the year ended 31 March 2018.