Singtel to invest US$250 million in Airtel Africa before its planned IPO

SingTel outlet in SingaporeSingTel outlet in Singapore

Singtel said on Wednesday that it entered an agreement with its associate, India-based Bharti Airtel, to invest US$250 million, or around S$344 million, in Airtel Africa, which has operations in 14 African countries.

The investment is part of the US$1.25 billion Airtel raised from global investors including Temasek, Warburg Pincus and Softbank Group International, with the proceeds earmarked to reduce Airtel Africa’s existing debt and expand its business before a planned initial public offering (IPO), it said in a filing to SGX before the market open on Wednesday.

Bharti Airtel said in a separate filing on Wednesday that Airtel Africa had existing debt of around US$5 billion, with any IPO proceeds to be used primarily to further reduce debt.

“Airtel Africa has seen a turnaround of its business in recent years,” Bharti Airtel said. “This investment demonstrates the confidence of leading global investors in the company’s ongoing robust growth and profitability. The investment also reinforces the increased growth potential of the Africa telecommunications sector.”

Raghunath Mandava, managing director and CEO for Africa at Bharti Airtel, said the deal would help the company deleverage its balance sheet further and increase its ability to upgrade its network, expand its coverage to different markets and boost the growth of its mobile wallet service, Airtel Money.

Singtel subscribed to 168.41 new ordinary shares in Airtel Africa, via its wholly owned subsidiary Singapore Telecom International, it said, with the total share capital to comprise 2.95 billion shares, the Singapore telco’s filing said.

Singtel also expressed confidence in the outlook for Africa’s telco sector.

“Our investment into Airtel Africa reflects our confidence in the long-term growth potential of Africa with its young and growing population. For many of Airtel Africa’s customers, the mobile phone is the key enabler for digital and financial inclusion,” Arthur Lang, CEO of Singtel’s International Group, the filing said.

“We believe it is in a strong position to benefit from increasing smartphone penetration and mobile money adoption,” he added.

Airtel Africa is the continent’s second-largest telecom operator, with a customer base of 91 million and is in the top two in most of its 14 markets, the filing said, adding revenue growth in voice and data has been healthy. Its mobile wallet service, Airtel Money, has 11.8 million subscribers, it said.

Airtel Africa had net assets of around US$1.17 billion as of 30 September, the filing said.

After the deal, Singapore Telecom International increased its share capital to S$3.66 billion from S$3.31 billion via the allotment and issuance of 344 million shares at S$1 each to Singtel, Singtel’s filing said.

Africa is expected to be the world’s fastest growing mobile market, with unique mobile subscribers expected to rise to more than 500 million by 2020 from 420 million at the end of 2016, Singtel said, citing data from a GSMA 2017 mobile economy report.

This article was originally published on Wednesday 24 October 2018 at 7:17 A.M. SGT; it has since been updated.

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