Bharti Airtel is choosing to double down on its African investment rather than entering new markets, with chairman Sunil Mittal pledging a yearly investment of $1 billion into operations across the region in the “next few years.”
The Indian group has made what Mittal described as “massive investments in 17 [African] countries”, with CAPEX of over $1 billion annually. While sales for the fiscal year ending March 31 2014 were $4.5 billion, this was a rise of just 2% over the previous year.
Airtel’s African units, acquired from Zain in 2010 for $9 billion, bring in a third of its group earnings but have thus far not turned a profit. The group’s international operation – which largely consists of its Africa business, along with Bangladesh and Sri Lanka – registered a net loss of INR38.8 billion ($650 million) over the past fiscal year. This was substantially higher than the previous year’s loss of INR26.6 billion.
While Airtel is evidently optimistic that its investment will pay off, it will be hit hard by the decision by many African regulators to lower mobile termination rates. While the actual cuts will be relatively small – Nigeria lowered the rate for its 4 largest operators from NGN4.90 ($0.03) to N4.40 – the measure will have a significant impact on bigger providers such as Airtel that terminate more calls.
“The interconnect regime is changing in many places and in Nigeria also, and when interconnection rates change, revenues drop because the total amount of top line goes down,” said Mittal.