Airtel at Half Year 2018
Airtel Networks Plc, Telecom

In an industry that currently sees 76% market penetration, Airtel is proud to be one of the top 2 leading mobile communication providers in Zambia.

With a customer base that now stands at 5.36 million, Airtel is seeing growth in market share on a year on year (YoY) basis. According to SENS announcement published on 24th September 2018, revenue at half year was down by 7.91% due to competitive intensity and tariff reduction. On the latter though, Airtel only have themselves to blame as they were the ones who started the price war at the epilogue of 2017. Price wars are often entered to when players wish to grow or retain market share at the expense of revenue.

Although the topline (revenue) of the income statement took a bit of a haircut, Profit after Tax (PAT) was up 39.89% YoY to ZMW 130.8 million due to operational efficiencies. Unfortunately, half year results are often unaudited and hence lack detail such as notes to financials which can provide more details. For that we have to wait for the annual report.

Total assets marginally increased. However, of note was the over 100% increase in intangible assets. In addition, liquid assets also reduced due to reduction in pricing.

On working capital, at half year 2017, the company had current ratio of 0.35 while in 2018 it had a ratio of 0.21. The company continues to depend heavily on short term financing. In an industry that is cash rich, this is not a surprise. However, it also means that their head of suppliers has to maintain a good relationship with suppliers to the company as there can be notable pressure on servicing short term liabilities. The apparent zero sum between non-current and current liabilities shows a change in capital structure strategy that has the company leaning more towards short term facilities such as overdrafts than loan term debt.

For investors, they will be please with the Board’s proposal and approval that an interim dividend payment of K1.2 per share be declared by the Company for the period ended 30th June, 2018. With earnings per share at 1.26, we envisage the forward EPS will be around 2.52 at the end of the financial year. With cost containment in the era of rising oil prices and a volatile currency in Q3 and Q4, investors will be waiting with baited breath for a possible second declaration of dividend.

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