New Delhi: India’s largest telecom operator Bharti Airtel Ltd on Wednesday said the unit managing its Africa operations is considering a potential initial public offering (IPO).

In a stock exchange filing, Bharti Airtel said the board of Bharti Airtel International (Netherlands) BV has authorized the management to begin non-binding exploratory discussions with banks and intermediaries to evaluate the possibility of a public listing.

“The above discussions are at an exploratory/preliminary stage and at this juncture, there is no certainty of any final decision or outcome," the company added.

Analysts believe an IPO will monetize Bharti Airtel’s Africa operations, at a time when it is engaged in a bruising battle with Reliance Jio Infocomm Ltd in India.

The company, which is locked in a price war since the launch of Reliance Jio in September 2016, was hit hard when the telecom regulator in September decided to slash interconnection usage charges levied by mobile networks handling incoming calls from rival networks. As a result, Bharti Airtel’s quarterly profit plunged 39% to Rs306 crore in the December quarter.

While revenues from India operations fell 11.3% year on year to Rs15,294 crore, the performance of its Africa unit saved some blushes. In constant currency terms, Africa revenues grew by 5.3% year-on-year to $783 million during the quarter compared with $744 million a year ago. This was largely led by strong growth in data and Airtel money transaction value.

“They have made Africa business profitable; so, the (company’s) plan is to get value out of it. In most markets in Africa, they are either number one or number two, so the valuation of Africa business will be attractive," a Mumbai-based analyst said on the condition of anonymity.

The company’s aggregate customer base in Africa too increased from 84.1 million as of December end from 76.9 million in the corresponding quarter last year, an increase of 9.4%. It offers 3G services and Airtel Money across 14 countries in Africa and 4G services in four countries in the continent.

“With sustained competitive pressure from Jio, Bharti Airtel’s EBITDA is expected to see further decline for the next few quarters. If their net debt to EBITDA ratio goes beyond three times, it could risk the chance of a rating downgrade. The valuation of Africa business may insulate the company from a potential rating downgrade," the analyst cited above said.

Bharti Airtel entered Africa in 2010 when it purchased Zain’s operations in the continent for $10.7 billion. Over the past few years, it has been trying to capture the African market through local deals. It has made three small-ticket acquisitions in Uganda, Congo Brazzaville and Kenya.

In October, Airtel inked a deal with Millicom, which operates the brand Tigo, to combine their operations in Ghana. After this deal, in December, Airtel’s subsidiary in Rwanda announced the acquisition of Tigo Rwanda Ltd, making Airtel the second largest telecom firm in that country.

“Airtel has taken proactive steps in Africa to consolidate and realign the market structure in the last few remaining countries where its operations are lagging on account of lower market share and presence of too many operators," Bharti Airtel chairman Sunil Bharti Mittal said in a statement on 19 December.

“We are also committed to the long-term viability of our operations in Kenya and Tanzania, to ensure that in 2018, all our 15 operations in Africa start contributing positive margins and cash flows towards a healthy and profitable Airtel Africa," Mittal had said then.

In India too, the company is taking steps to reduce debt. On 5 February, the company announced that Singapore Telecommunications Ltd (Singtel) will indirectly raise its stake in Bharti Airtel by investing Rs2,649 crore in Bharti Telecom Ltd, the promoter company of Airtel, through a preferential allotment of shares. The money will be used to reduce debt.

Bharti announced in December that it, along with another group entity, will sell a combined 20% in its DTH arm Bharti Telemedia Ltd to private equity firm Warburg Pincus for $350 million.

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