Airtel Zambia grapples with “devaluation of Kwacha” at Half Year 2019
Airtel Networks Plc, Telecom

Airtel Zambia has advised shareholders that the main reason for profit after tax plummeting by 122.14% on a year on year basis was mainly because of the Kwacha’s devaluation during the period under review. The unaudited results published on SENS 30th September 2019 also showed that the company had increased its appetite for debt in the first six months of 2019.


In an industry that now has 14.9 million subscribers in Zambia which represents a penetration rate of circa 84%, Airtel now boasts of customer base increase of 8% to 5.789 million subscribers. The company’s revenues were up by 11.1% to K1.001 billion on a year on year basis with gross profit also increased by a similar margin of 11.94%. However, a loss after tax was recorded on the interim income statement on account of a 1188.24% increase in exchange and finance costs.


A closer look at the abridged cash flow statement, net cash utilized in financing activities increased by over 50% in the first half of 2019 when compared to the same period in the previous year. Furthermore, the balance sheet reveals that there was a 40% and 22% increase in non-current and in current liabilities.


The surge in liabilities is evidence that the management team has been engaged in capital expenditure that has led to the growth of assets. Fourth Generation mobile technology is expensive and this can be seen on the balance sheet as the company has also increased its spend on Intellectual Property (non-tangible assets).


Bottom-line margins have been under pressure following the 2017 price war that Airtel themselves started which saw 4G Data prices being slashed by astronomical percentages that shock the market. What followed was the market leader by subscriber base, MTN, following suit with the price reduction, much to diminished margins and the detriment of ZAMTEL who has been positioned at a distant 3rd place and struggling for profitability.


With earnings per share being negative at half-year, the forward projections for the company indicate that the management team will be looking closely at its cost structure and the impact of debt (both short term and long term).

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