Airtel Africa, the second-most valuable company on the Nigerian Exchange (NGX), commands a dominant market capitalization of N8.11 trillion, accounting for 13.2% of the entire equity market.
Despite its size and market share, the stock’s performance has been underwhelming.
With a 14% year-to-date gain in 2024, following a modest 15.41% rise in 2023, the question arises: Is Airtel Africa still a compelling investment in the face of mounting challenges?
Navigating macroeconomic headwinds
Currency devaluations, particularly in Nigeria, have taken a toll on Airtel Africa’s financials.
- In its first half of 2025 financial year earnings report, the company revealed a 9.7% drop in reported revenue to $2.37 billion, largely due to a $660 million hit from currency devaluations.
- Operating expenses climbed by $271 million, driven by inflationary pressures, including sharp increases in fuel costs. These challenges squeezed EBITDA margins, which fell from 49.6% to 45.8%, reflecting the pressure on profitability.
- Yet, Airtel Africa’s core operations remained robust. Data services and mobile money continued their upward trajectory, with customer numbers rising by 10% and 14%, respectively.
Mobile money, a key growth engine, has now reached 41.5 million users, signaling strong future potential in underserved markets.
Management’s perspective
During the first half of 2025 earnings call, CFO Jaideep Paul acknowledged the macroeconomic pressures, particularly in Nigeria, but highlighted steps taken to address them.
“Our reported performance continues to be negatively impacted by significant currency devaluation across key markets, most significantly in Nigeria,” he said. “However, we have delivered good underlying results despite these headwinds.”
To mitigate these challenges, he said, Airtel Africa has undertaken several strategic initiatives:
- Localizing Debt: The Company significantly reduced its exposure to foreign exchange volatility by shifting its debt mix to local currency borrowings. This move, reduced forex losses by $154 million compared to the previous year.
- Debt Repayment: A substantial $809 million in foreign currency debt was repaid, insulating the balance sheet from further shocks.
- Cost Optimization: Efforts to drive operational efficiencies have begun to stabilize margins, with EBITDA margin recovery evident in Q2.
These steps highlight Airtel Africa’s proactive approach to managing external risks while maintaining operational focus.
Commitment to Shareholders
In addition to operational resilience, Airtel Africa’s commitment to shareholder returns remains a bright spot.
- The company declared an interim dividend of 2.6 cents per share for the first half of 2025 fiscal year, representing a 9% increase.
- This follows a consistent trend of dividend growth, reflecting management’s confidence in the company’s cash generation and long-term growth prospects. During the earnings calls Q and A, the CEO, Sunil Taldar, remarked:
“The shareholder returns are a very important part of our capital allocation strategy. As you’ve seen, we have a progressive dividend policy and we’ve been increasing our dividend by circa 9% over the last few years.”
Outlook
Airtel Africa’s growth prospects remain strong, particularly in data and mobile money services. These segments are central to Africa’s digital transformation, offering high-margin opportunities that can offset macroeconomic pressures.
- Additionally, the company’s planned capital expenditure of $725–$750 million for the financial year demonstrates a commitment to expanding its network infrastructure, ensuring it remains competitive in the rapidly evolving telecom sector.
- Its dividend policy reflects a forward-looking approach that not only rewards shareholders today but also builds confidence in its ability to navigate future uncertainties.
For investors, this is a signal that the company is not merely focused on mitigating short-term challenges but is also committed to delivering sustainable value over the long term.
Risks investors should watch
While Airtel Africa has demonstrated resilience, key risks remain:
- Currency devaluation: Further depreciation in key markets like Nigeria could still impact earnings despite local-currency debt.
- Regulatory restrictions: Regulatory hurdles, particularly in Nigeria, have affected subscriber growth. The flat growth in its Nigerian customer base underscores this challenge.
- Inflationary pressures: Rising costs, particularly for network operations and fuel, could continue to compress margins despite cost-saving initiatives.
Investment case
- For existing shareholders – Hold: Airtel Africa’s dividend policy and its strategic steps to manage macroeconomic risks make it a reliable hold for investors seeking income and stability.
- For Potential Investors – Cautious buy: The growth potential in data and mobile money, coupled with the company’s proactive risk management, offers a promising long-term outlook. However, external risks necessitate careful timing for entry.
Overall, Airtel Africa remains a company of contrasts: resilience and growth potential in high-margin segments like data and mobile money are counterbalanced by macroeconomic headwinds and regulatory challenges.
The management’s proactive measures to localize debt, optimize costs, and grow dividends reflect a robust strategy, but external risks cannot be ignored.
For investors willing to take a long-term view, Airtel Africa presents a cautiously optimistic opportunity to tap into Africa’s burgeoning telecom and financial services sectors.