Finally, Airtel Africa on a path to profit
Airtel Africa is on a path to profit. This is according to the latest financial report that puts Airtel Africa at a $90 million loss- $80 million less than the loss made in the previous financial year. This has been driven by a sustained growth in customer base and a continued rise in its data business backed up by numerous consumer offers. According to analysts, an adoption of mobile money coupled with cost-optimization has seen Airtel Africa on a path to eventual profit.
It cost Sunit Mitta; an Indian Billionaire $9billion to buy Zain Telecoms’ assets in 2010. This marked Bharti-Airtel Ltd’s entry into the global market. Airtel’s Initial plan for its African operation were big-100 million subscribers from the 42 million at the time of purchase. The company targeted a revenue of $5billion from $3.6 billion at the time and an Ebitda of $2billion in 3 years after the acquisition. Ebitda is a company’s earnings before tax, depreciation and interest rates and is considered as a measure of profitability for a company. Airtel has not made a dollar in profit since its entry into the African market.
According to a Credit Suisse research report, “Africa continues to be a pain point—with external factors (currency fall, economy weakness with crude fall) compounding an already tough competitive and regulatory environment”. Analysts say that Airtel’s business plan was sound save for the fact that it overestimated the potential of the investment Zain Telecoms had put in place.
The low volume of calls and an experimentation of tariffs made the African investment not worthwhile. The effort towards integration was undermined by Zain’s under-investment in the brand and the network. Airtel has tirelessly worked on these challenges with a new management in place and a tower lease-back seems to work in reducing the loss burden and contribute in the road towards profitability.
According to a top company executive, “Some war on waste measures in the continent include driving localized format shops to provide Airtel Money, digitization initiatives to reduce call center expenses and deployment of new energy-efficient technologies for running base stations,”
Its restructuring drive has seen an employee reduction, something the company says is geared towards reducing overall costs.