IFC boosts Airtel with Sh17.15bn investment

The International Finance Corporation (IFC) will invest Sh17.15 billion ($150 million) in Airtel Africa to support the telco’s capital expenditure and loan refinancing requirements in seven markets, including Kenya.

The global financier disclosed that its board of directors has approved the investment comprising up to Sh17.15 billion from its own account and up to $44 million (Sh5.03 billion) in mobilisation from Managed Co-Lending Portfolio Programme to support Airtel Africa’s network investment across seven subsidiaries as well as refinancing its existing loans.

“Funds will be used to support Airtel Africa’s operations and investments across seven subsidiaries in sub-Saharan Africa, namely Chad, Democratic Republic of Congo, Kenya, Madagascar, Niger, Republic of Congo, and Zambia,” the IFC said.

Airtel’s business in Africa is under heavy pressure, partly due to debt and intense competition by rival telcos that continue to eat into its revenue cake.

For instance, financial records show that Airtel Kenya’s losses doubled in 2020 to Sh5.9 billion even as its auditors raised the red flag over the company’s financial health after the telco’s cumulative losses rose to Sh77.41 billion.

Airtel also saw its net liability position widen further to Sh43.7 billion in the full year to December 2020, up from Sh37.78 billion as of December 2019, pointing to its insolvent position.

The company posted its highest loss in history in the financial year ended March 31, 2021, having halved the loss to Sh2.78 billion in 2019, up from Sh5.8 billion in 2017, but losses accumulated over the years and an increasing debt load pushed it into a precarious financial position.

Deep in debt

“These conditions, along with other matters… indicate the existence of a material uncertainty, which may cast significant doubt on the company’s ability to continue as a going concern,” warns Airtel’s auditors Deloitte.

Airtel remains deep in debt with its borrowings in the 2020 financial year jumping to Sh9.23 billion, up from Sh6.83 billion in 2019.

Its net assets in foreign currencies rose to Sh8.89 billion in 2020, up from Sh6.19 billion the previous year, while its net foreign currency liabilities stood at Sh56.17 billion up from Sh49.85 billion in 2019.

In 2020, Airtel Kenya picked up Sh2.18 billion in new loans from JP Morgan Bank but also had advances from HSBC-Mauritius (Sh1.64 billion), Citi Bank (Sh5.4 billion), and Sh1.7 billion in loan and overdrafts from Standard Chartered Bank.

It has, however, cleared its Sh1 billion loan from Stanbic Bank. Its net borrowings as at March 2021 stood at Sh61.28 billion, up from Sh53.19 billion the previous year.

“The current borrowings from HSBC-Mauritius and Standard Chartered Bank are repayable within 12 months to December 2021,” it said, indicating that it retired them by the end of last year.

The overdraft facility Airtel has with Standard Chartered Bank bears interest of 9.25 percent and as at December 31, 2021, the overdrawn balance was Sh702.7 million, having doubled from Sh361.3 million as of December 2019.