NEW DELHI - Bharti Airtel announced on Tuesday the signing of an agreement with Millicom International Cellular to take over all its Rwanda operations, making the Indian telecom the number two operator behind MTN in the East-Central African country.
Millicom operates as Tigo Rwanda, and Airtel Rwanda will acquire the complete equity interest in the brand. The deal consolidates the Rwandan telecom market and strengthens Airtel's position there with revenues of over $80 million and a revenue market share of over 40%.
More than 3.25 million existing Millicom Rwanda customers will join over 370 million customers in the Airtel network spread over 17 countries, 15 of which are in Africa, where it ranks first or second in 12 countries and has an overall customer base of almost 82 million.
Airtel and Tigo have already merged operations in West Africa's Ghana. "Today, it has taken yet another important step to acquire Tigo Rwanda to become a profitable and a strong challenger in a two-player market," said Sunil Bharti Mittal, Bharti Airtel's chairman.
A company statement said the consideration for the transaction is based on approximately six times EBITDA [earnings before interest, tax, depreciation, and amortization], payable over two years, but exact figures were not provided.
The agreement is subject to regulatory and statutory approvals.
Mittal said the company has taken proactive steps in Africa to consolidate and realign the market structure in the last few remaining countries where its operations lag due to a lower market share and operator saturation.
He said the company is committed to the long-term viability of its operations in two East African countries -- Kenya and Tanzania - "to ensure that in 2018 all its 15 operations in Africa start contributing positive margins and cash flows toward a healthy and profitable Airtel Africa."
Raghunath Mandava, chief executive of Airtel Africa, said the Rwanda deal "will create synergies with our existing business and help boost operational efficiencies in the market."
In India, Airtel has suffered pressure on its margins since the September 2016 entry of Reliance Jio Infocomm, part of Reliance Industries, which offered free voice calls and data plans for seven months before announcing very low tariffs in April.
Airtel posted a 76.5% slump in net profit in the July-September quarter, which stood at 3.43 billion rupees. Net profit for India for this period before exceptional items were included was just 1.21 billion rupees compared to 3.06 billion rupees for Africa operations, India's Economic Times reported -- "underlining the pressures on the local operations, while operations in Africa show continued signs of improving."
Airtel entered Africa in June 2010 when it bought Kuwait-based Zain Group's operations in 15 countries across the continent for $10.7 billion. This involved $8.3 billion in bank loans. It had been aiming for $5 billion in sales with $2 billion in operating profit by 2013, but has instead faced a string of losses.
Airtel Africa started reporting profit in the last quarter of the financial year ending in March this year. That came after strategic steps to turn around the business on the continent by divesting telecom towers in Congo and Niger; selling operations in Burkina Faso and Sierra Leone; and combining operations in Ghana with Millicom.