Airtel Africa Completes $550 Million Bond Repayment, Reduces Foreign Currency Debt

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Airtel Africa has announced that its subsidiary, Bharti Airtel International (Netherlands) B.V., has successfully completed a $550 million bond repayment due this month. This move is part of the company’s strategy to cut foreign currency debt.

In a notice to the Nigerian Exchange Limited, Airtel Africa confirmed that its subsidiary had fully repaid the 5.35% Guaranteed Senior Notes maturing on May 20, 2024. Simon O’Hara, the Group Company Secretary, stated that the bond repayment was made entirely from cash reserves at the holding company (HoldCo). This repayment is a continuation of Airtel Africa’s strategy to reduce external foreign currency debt.

At the time of the initial public offering (IPO) in June 2019, the Group had $2,719 million of external debt at HoldCo, resulting in significant exposure to currency fluctuations and reliance on upstreaming funds to cover both interest costs and principal repayment. Through consistent execution of its strategy, supporting strong free cash flow generation, and continued upstreaming success, Airtel Africa has been reducing HoldCo debt over the past few years. The Group has now reached the significant milestone of a zero-debt position at HoldCo.

“The current leverage and capital structure reflect the Group’s successful capital allocation strategy in place since our IPO. We aim to continue reducing foreign currency debt obligations across our OpCos,” the company said.

Currency Headwinds

Bharti Airtel’s Africa operations have faced significant financial challenges due to currency devaluations in several key markets, including Nigeria and Malawi. These devaluations have resulted in substantial foreign exchange losses, amounting to $1.7 billion for the fiscal year ending March 31, 2024.

Despite strong growth in service revenues when measured in constant currency, showing an overall increase of 20.9% and accelerating to 23.1% in the fourth quarter, the company’s financial performance in reported currency has been adversely affected. Group revenue declined by 5.3% to $4.979 billion, and EBITDA decreased by 5.7% to $2.428 billion, primarily due to the devaluation of the Nigerian Naira and Malawian Kwacha against the US dollar.

As of May 20, 2024, the Nigerian Naira had significantly devalued to N1,468.99/$, leading to a reported revenue loss of $1.042 billion and a $554 million reduction in EBITDA.

CEO’s Comments

Airtel CEO Olusegun Ogunsanya highlighted the company’s efforts to mitigate the adverse effects of currency fluctuations and drive revenue growth. He emphasized that the consistent deployment of the company’s ‘Win with’ strategy has accelerated constant currency revenue growth, reduced the impact of currency headwinds, and demonstrated the resilience of Airtel’s affordable offerings despite inflationary pressures.

Ogunsanya stressed the importance of investments in distribution and technology in facilitating growth. These investments are fundamental to Airtel’s performance, enabling the company to support and sustain growth through enhanced distribution networks and necessary technological advancements, which are key to maintaining its competitive edge.

Share Buyback Program

In February 2024, Airtel Africa announced plans to initiate a share buyback program following a report of a negative Basic EPS in its financial results for the first nine months of 2024. CEO Ogunsanya stated, “In light of our consistent strong operating performance and given current leverage, the Board intends to launch a share buy-back programme of up to $100 million, starting early March 2024 over a 12-month period.”

The share buyback program commenced in March 2024 and is structured in two phases with a maximum expenditure of $100 million. As of May 20, 2024, the company had repurchased 14,447,681 ordinary shares at an average price of GBP100.46 per share.

Share buybacks can impact various aspects of a company, including EPS, cash flow, and valuation, serving as a strategic tool to achieve key objectives. For Airtel Africa, repurchasing its shares is a prudent use of capital, given the increase in cash reserves, current leverage, strong operating cash generation, and robust long-term growth outlook.

Airtel Africa closed its trading day on May 20, 2024, at N2,150.00 per share on the Nigerian Stock Exchange (NGX). The telecom firm began the year with a share price of N1,887.00 and has gained 13.9% in price valuation.

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