Airtel Kenya blames Safaricom, CA for its financial woes

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  • In 2020, Airtel Kenya losses doubled to sh5.9 billion resulting in a cumulative loss of Sh77.41 billion (US$680 million), its highest loss in history.
  • Auditors have been raising a red flag on Airtel Kenya’s financial health and stability.
  • Airtel Africa, which funds operations in 14 African countries, has a cumulative debt of US$3.12 billion

Airtel Kenya is set on having Safaricom declared a dominant player in the telecoms industry to level the playing ground.

The operator says this is the first step to ensuring market competitiveness which the company believes has been the sticking point and critical barrier in taking any steps to rectify any market anomalies in Kenya

Airtel’s parent company, Bharti Enterprises, Airtel Africa, keeps Airtel Kenya afloat through financial support.

Read: Equity Group joins insurance sector, granted operations license by IRA

Airtel Network Kenya, the second biggest telecommunications network, saw shareholder loans from its holding firm, Bharti Airtel Kenya BV, rise by 12.01 per cent from sh46.6 million in 2020 to sh52.2 million in the year ending December 2020.

The causes of the financial losses have been additional lending, forex losses as the shilling depreciate, and postponement in paying interests.

Capitalization interest due to being paid stands at Sh1.34 billion, which has disrupted cash flow in the firm.

Airtel Kenya said that the issued shareholder funds, revenue generated from its operations, and borrowing from external lenders had kept the company afloat.

The parent company has committed to financially afloat the company if any additional funds are required to meet the firm’s obligations.

Airtel Kenya as of December 2020.

In 2020, Airtel Kenya losses doubled to sh5.9 billion resulting in a cumulative loss of Sh77.41 billion ($680 million), its highest loss in history. Auditors have been raising a red flag on the company’s financial health and stability.

Airtel Kenya accuses Safaricom for its financial woes. [Photo/Mobitrends]
As of December 2020, Airtel Kenya’s net liability position shot to sh47.3 billion from sh37.18 billion as of December 2019, which heightened the probability of its insolvent position.

In efforts to keep its wings flapping, Airtel Kenya had capitalized interest worth Sh1.29 billion and converted sh2.88 billion worth of loans to equity to fund cash injection into its mobile money service.

Airtel in Africa

Airtel Africa, which funds operations in 14 African countries, has a cumulative debt of $3.12 billion. The company has an uphill task in running telecommunications services, especially mobile money, in some countries in Africa.

The telco is reviewing its mobile service business in Africa to list it on the stock exchange market.

The listing has attracted investors from three Companies-Qatar Investment Authority (QIA), MasterCard, and The Rise Fund-who have signed agreements to inject $500 million into Airtel mobile money operations in exchange for a minority shareholding in the exchange market.

Read: Private Equity Firms in East Africa

In 2021, Airtel Africa’s mobile money business valuation on the continent was at $2.65 billion.

Airtel clash with Safaricom

The telecommunications market in Kenya has been dominated by Safaricom, with the company posting a net profit of Sh68.87 million in the financial year ending December 2020.

  • Airtel Networks Kenya filed a petition to the ICT committee of Kenya’s National Assembly, claiming unfair competition from Safaricom, which holds 64 per cent of Kenya’s telecommunications industry.

Safaricom’s market share doubles 27 per cent of the market held by Airtel. Telkom Kenya has 7 per cent of the claim.

The firm accused the Competition Authority of Kenya of:

  1. Ignoring Safaricom’s alleged market domination
  2. Abetting the dominance through biased mobile spectrum allocation.
  3. Failing to lower fees charged on interconnection to users by Safaricom.

“Declaring Safaricom’s dominance is the first step to ensuring market competitiveness which we believe has been the sticking point and critical barrier in taking any steps to rectify any market anomalies in Kenya, part of the Petition from Airtel Kenya read.

Communications Authority of Kenya headquarters along Waiyaki Way, Nairobi. [Photo/CA LinkedIn]
Communications Authority of Kenya (CA) cuts Mobile Termination Rates (MTR)

Airtel Networks Kenya has condemned Safaricom for attempting to scatter the recently announced cut in mobile termination rates (MTR).

MTRs are charges levied per minute by a mobile service provider on other telecommunications service providers for terminating calls in its network.

The firm further incriminated Safaricom for only protecting its revenues from other telecom competitors.

CAK cut the current MTR charge from Sh0.99 per minute, after a freeze of six years, to sh0.12 per minute.

However, Safaricom defended its dominance, saying that competition is healthy and any telecom company can build its power by increasing investments and creating innovations.

The firm’s chief executive, Peter Ndegwa, said that Safaricom did not have any dominance and could not act independently of other players and service consumers.

Airtel referred to eight countries in Africa where companies had been declared dominant in the market with even lower holdings than Safaricom in the telecommunications market.

Read: Qatar acquires stake in Airtel Africa’s mobile money business for $200 million

I am a journalist who is an enthusiastic tech, business and investment news writer from across Africa. There is always something good happening in Africa but most gets lost in the stereotypes. I tell the stories that matter to the Africans for Africa. Have a tip? You can contact me at j.kangethe@theexchange.africa

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