Market Insight

Airtel Africa makes its fifth market consolidation move by acquiring Tigo Rwanda

January 17, 2018  | Subscribers Only

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Airtel Africa confirmed that they have entered an agreement with Millicom to acquire Tigo Rwanda, marking their fifth market consolidation move in Africa since 2013. Whilst the details of the acquisition and approval from Rwanda’s Utilities Regulatory Authority (RURA) have not been finalised, Airtel has spoken about the potential changes that will take place in the Rwandese telecoms market.

Airtel Rwanda has experienced some volatility in the Rwandan market as overall subscriptions shrunk by 6% between Q4 2016 – Q3 2017 ,this acquisition will consolidate Airtel Rwanda’s position to become the leading operator in the Rwandese mobile market which now serves 8 million subscribers between three mobile networks with 68% mobile penetration. 

  • As of Q3 2017, market share by subscriptions was split between MTN (44%), Tigo (36%) and Airtel (20%).
     
  • Millicom and Bharti Airtel both have existing plans to consolidate their assets across Africa and recently completed a merger of their respective Ghanaian mobile networks in November 2017.
     
  • If the acquisition is approved by RURA, Airtel is set to become the largest mobile operator in Rwanda with a forecasted market share of 54-56% of the market once Tigo’s subscribers are absorbed into Airtel’s network.

Our Analysis

Airtel Africa currently operates mobile networks in: Chad, Democratic Republic of the Congo (DRC), Republic of the Congo, Gabon, Ghana, Kenya, Malawi, Madagascar, Niger, Nigeria, Rwanda, Seychelles, Tanzania, Uganda and Zambia which (excluding Telecom Seychelles) were acquired through a US$9 billion acquisition of Kuwait-based operator Zain’s African mobile operations in 2010.  

Airtel Africa also purchased Telecom Seychelles in the same year, through an 100% stake purchase of the incumbent operator from the government of the Seychelles.

Airtel Africa then consolidated the Ugandan market by adding to the Zain acquired business with the acquisition of Warid Uganda in 2013. Prior to the acquisition, Airtel Uganda ranked second in the market with 25% of the market share, this increased to 38% following the absorption of Warid’s subscribers, solidifying Airtel Uganda’s second place position in the market against MTN Uganda who held a market share of 46% in 2013.

In 2016, Airtel Africa announced that there would be further a further round of asset consolidation taking place in low-performance markets in order to increase market share and profitability. In June 2016 Airtel sold their poorly performing operations in Burkina Faso and Sierra Leone to France-based Orange group for an undisclosed sum.

In February 2017, Airtel Africa and Millicom international announced that they would enter a joint- venture to merge Airtel Ghana and Tigo Ghana with a 50-50 equity. Both companies sought to retain their operations in the Ghanaian market as both deemed the telecommunications industry to be highly valuable. Airtel and Millicom also signified that they were keen to merge or cooperate in other African markets where they had operations in common, though Millicom has mainly moved to relinquish control of African markets with outright sales such as this deal in Rwanda.

While GDP per capita is low, Rwanda is ranked as one of Africa’s fast growing economies, coupled with favourable regulatory conditions and a stable economic forecast the country is key to Airtel’s growth aspirations in retaining a profitable operation on the continent. The Rwandese government has invested in developing KT 4G, a wholesale 4G LTE network that increases the value of a position in the Rwandese telecommunications industry as it will decrease operator investment in infrastructure.

KT’s 4G network currently covers 95% of Rwanda’s population.

Bharti Airtel set several targets for Airtel Africa in 2010 –aiming to increase their African subscriber base by 72.4% to 100 million subscribers, achieving US $5 billion in revenue and US$ 2 billion EBITDA by March 2013.

However, in 2017 Bharti Airtel chairman Sunil Mittal admitted to having miscalculated the value of Zain’s market position in Africa and related assets after the acquisition. Airtel Africa’s Managing director also stated that although the division was yet to report a profit that it had become ‘cash positive’, targets had been downgraded since their market entrance and the division would continue on a path to ensure future profitability by continuing to acquire/merge operations or sell assets. Bharti Airtel’s Q3 2017 report showed that Airtel Africa had amassed just under 82 million subscribers, revenue of US$ 809 million and US$ 261 million EBITDA.

Bharti Airtel is one of the few companies to have emerged with some success from the ongoing Indian price war, retaining and growing its subscriber base. While this will have stretched the company financially, it improves the long term outlook for the company domestically as it faces lower levels of competition and a greater advantages of scale. The Rwandan acquisition shows similar dynamics at play for Airtel Africa.

Research by Market
Mobile & Telecom
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