Airtel Africa shares slump in market debut

Bharti Airtel’s Africa unit plunged in London trading after raising about US$750-million in an initial public offering, making it among the worst debuts on European exchanges this year.

Airtel Africa dropped as much as 16% to 67p/share, matching the first-day decline for OssDsign last month. Airtel Africa said it had priced the offering at 80p/share, at the low end of its range, giving the company a market capitalisation of about £3.1-billion. It traded at 71.4p as of 9.41am.

The weak market showing for the African carrier, the continent’s second largest by subscribers, comes as parent Bharti Airtel struggles back home with a years-long price war and mounting debt. Proceeds from the IPO will help the India-based wireless operator pare debt just as it also needs funds to upgrade its mobile network to 5G technology.

Airtel Africa may be suffering from broader investor unease about telecommunications carriers in emerging markets, said Ally McKinnon, a fund manager at Scottish Investment Trust, which didn’t participate in the IPO.

Phone companies were popular during the investment boom in so-called Bric stocks — from Brazil, Russia, India and China — but they can be at risk of state intervention, he said, pointing to recent examples of Johannesburg-based MTN Group battling multibillion-dollar claims by Nigerian authorities over taxes and fines.

“Once you’ve got the network built, you’re vulnerable because you’ve got assets in the country, you’re a big company that makes money, or makes cash flow at least,” McKinnon said.

In a statement before the start of trading, Airtel Africa CEO Raghunath Mandava said the IPO was a proud moment for the company. “We are delighted by the strong response we have received from the many high-quality investors from around the world,” Mandava said.

One of the largest

Bharti joins Volkswagen in pricing IPOs at the low end of a target range for listings on Friday. Volkswagen raised $1.8-billion through the IPO of its truck unit, Traton, which dropped as much as 2.4% in Frankfurt. Still, low interest rates are helping demand and some sales that proceeded have done well.

The Airtel Africa sale is among the largest IPOs announced in 2019 in London, where emerging markets companies are boosting volumes amid a lacklustre year for British issuers. Middle Eastern payments processor Network International Holdings raised £1.1-billion last month in the largest London IPO this year.

Airtel Africa already raised $1.25-billion last year from investors including Temasek Holdings and SoftBank Group and the company is also planning to pursue a local secondary listing in Nigeria.

Bharti is relying more on Africa for growth as prospects for a quick revival of profit in India dim. Despite a market with more than 1.1 billion subscribers, competition has driven data tariffs to the cheapest in the world — less than R15 for 1GB. The monthly average revenue per mobile user is also among the lowest — at about R30 — compared to about R113 in China and at least R560 in the US.  — Reported by Swetha Gopinath and Thomas Seal, with assistance from Dave McCombs, Phil Serafino and PR Sanjai, (c) 2019 Bloomberg LP