Airtel Africa has confirmed that its subsidiary, Bharti Airtel International (Netherlands) B.V., has completed a $550 million bond repayment that was due this month.
The move is targeted at cutting foreign currency debt.
Airtel Africa in the company’s notice to the Nigerian Exchange Limited seen by Nairametrics confirmed that its subsidiary has fully repaid the 5.35% Guaranteed Senior Notes maturing on 20 May 2024.
The notice signed by the Group Company Secretary, Simon O’Hara, said the bond repayment of $550 million has been made exclusively out of cash reserves at the holding company (HoldCo) and is a continuation of its strategy to reduce external foreign currency debt.
The company noted that at the time of the initial public offer (IPO) in June 2019, the Group had $2,719 million of external debt at HoldCo which resulted in significant exposure to currency fluctuations and the reliance on upstreaming funds to cover both interest costs and the principal repayment.
According to Airtel, through consistent execution of its strategy supporting strong free cash flow generation, and continued upstreaming success, the Group has been reducing Holdco debt over the past few years and has now reached the significant milestone of a zero-debt position at HoldCo.
“The current leverage and capital structure are a reflection of the Group’s successful capital allocation strategy that has been in place since our IPO, and it will aim to continue reducing foreign currency debt obligations across its OpCo’s,” 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. The 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%, which accelerated 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 $2.428 billion. These declines are primarily attributed to the devaluation of the Nigerian Naira and Malawian Kwacha against the US dollar, which has significantly impacted Airtel’s financial results.
The Nigerian Naira has experienced a significant devaluation, declining to N1,468.99/$ as of May 20, 2024. This substantial depreciation adversely impacted Airtel’s financial performance, resulting in a reported revenue loss of $1.042 billion and a $554 million reduction in EBITDA.
The CEO’s comment
Airtel CEO, Olusegun Ogunsanya, speaking on the approach in mitigating the adverse effects of currency fluctuations and driving revenue growth pointed out 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 emphasized the critical role of investments in distribution and technology in facilitating growth.
He noted that 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.
Airtel Africa closed its trading day on Monday, 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% on the price valuation.
More insights
In February 2024, Airtel Africa, a leading telecommunications company, announced plans to initiate a share buyback program following the report of a negative Basic EPS in its financial results for the first nine months of 2024.
Group CEO, Olusegun Ogunsanya, addressed the share buyback, stating, “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, which commenced in March 2024, 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, and serve 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.