Tigo Rwanda during their launch of 4G roaming services. The
consolidation of the Rwandan business is subject to regulatory approvals
from the competition authorities. PHOTO FILE | NATION
Regional telco Tigo has sold its Rwandan business to Airtel —
its third such sale this year — in a move seen as an exit strategy out
of its African business and a consolidation for Airtel, whose Rwandan
unit has been posting losses.
Last week, Bharti
announced that it had entered into an agreement with Millicom
International, the parent firm of Tigo Rwanda, to buy its 100 per cent
equity, making Airtel the only other operator in that market after MTN.
Chairman
of Bharti Airtel Sunil Mittal, said that they had resorted to
consolidating their business through acquisitions in markets where the
telcos operations are lagging due to low market share and the presence
of too many operators.
“Airtel and Tigo have merged
their operations to create a strong viable entity in Ghana,” said Mr
Mittal. “In acquiring Tigo Rwanda, we aim to become a profitable and a
strong challenger in a two-player market.”
The
consolidation of the Rwandan business is subject to regulatory approvals
from the competition authorities. It is understood that the transaction
is worth six times the net earnings of Tigo Rwanda, and will be payable
over the next two years.
But it is the sale of
Millicom’s businesses in Ghana and Senegal this year that is seen as a
strategic withdrawal by the South Africa-based firm.
In
October, the firm entered into an equal share merger agreement with
Airtel Ghana. In February, the firm sold off its Senegal business to
Orange in a deal valued at $129 million. In February 2016, it sold its
assets in the Democratic Republic of Congo to Orange for $160 million.
“The
decision to sell in Senegal was an opportunistic move, and Millicom
felt it was in a better position after its restructuring. We need to
continue focusing on revenue growth and we’re well on track to get
better returns for our investors,” Millicom’s Africa chief executive
officer Mohamed Dabbour said in an interview with ITWeb Africa.
The
firm, which has strong operations in Latin America, however said that
it is only going for acquisitions and mergers in a bid to remain
competitive on a continent that is saddled by too many players.
Tigo
now remains with operations in Tanzania, which is one of its most
lucrative African business, and Chad. It is also understood that it will
be looking at selling its 22 per cent stake in the Helios Africa tower
business.
Overcrowded markets
Mr
Dabbour said mergers and acquisitions happening across the continent
demonstrated there were too many players and that markets were
overcrowded.
“If you exclude specific market leaders in
the telecommunication sector in Africa, most other players are not
profitable. We therefore believe that consolidation is needed in some
key African markets that are very fragmented,” Mr Dabbour said, adding
that the operator has worked to for instance consolidate its position in
countries like Tanzania with the acquisition of Zantel two years ago.
For
Airtel, the acquisition in Rwanda comes barely a week after it
dispelled claims that it was seeking to exit Kenya, Tanzania and Rwanda.
Mr Mittal said that they should have instead done a thorough due
diligence before its 2010 purchase of the African operations from Zain.
“Our
Africa investment was a bit rushed and should have been done with a
little more due diligence. We have learnt our lessons over the past six
years and we are sure we will turn around the remaining units into
profitability soon,” said Mr Mitta.
Over the past three
years, the Indian telecommunication giant has been solidifying its
market position in Africa through mergers and acquisitions as it seeks
to become a key player.
In Kenya, it acquired assets
from Yu mobile, Uganda’s and Congo’s Warid. Airtel has also indicated
that it still values the Kenyan and Tanzanian operations and will work
to ensure their viability.
“We are also committed to
the long term viability of our operations in Kenya and Tanzania, to
ensure that in 2018 all our 15 operations in Africa start contributing
positive margins and cash flows towards a healthy and profitable Airtel
Africa,” said Mr Mittal.
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