Airtel's Rwanda unit to buy Millicom subsidiary Tigo Rwanda

New Delhi: India’s largest telecom operator Bharti Airtel Ltd on Tuesday said its subsidiary in Rwanda will buy Tigo Rwanda Ltd, making Airtel the second largest telecom firm in the African nation.

In a statement, Bharti Airtel said Airtel Rwanda Ltd, which already operates in the country, has signed a definitive agreement with Millicom International Cellular S.A., to acquire 100% in its subsidiary Tigo Rwanda.

“The consideration for the transaction is based on approximately 6 times Ebitda multiple, payable over two years,” Airtel said on Tuesday. Ebitda is earnings before interest, tax, depreciation and amortization.

The deal size could be around $60-70 million, said a person aware of the matter, requesting anonymity.

This follows Airtel’s October deal with Millicom, which operates the brand Tigo, to combine their operations in Ghana. The merger has already made the combined entity the second largest mobile operator in that country.

The Indian telecom giant’s Africa venture started in 2010 when it bought Zain’s Africa operations 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 the continent in Uganda, Congo Brazzaville and Kenya. With the latest acquisition, existing customers of Tigo Rwanda will join Airtel’s network. The agreement is subject to regulatory and statutory approvals.

“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 the statement.

“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 added.

In India, Airtel has been engaged in a bruising tariff war after the entry of Reliance Jio Infocomm Ltd, which offered services free for almost seven months, before offering rock-bottom tariffs. Airtel is also likely to face pressure on its financial results in October-December as a result of the Telecom Regulatory Authority of India’s (Trai’s) move to cut interconnect usage charge from 14 paise a minute to 6 paise a minute from 1 October.

Interconnect usage charge is what an operator pays another to land calls on the latter’s network.

Net revenue from interconnect usage charge accounts for 4% of Bharti Airtel’s consolidated Ebitda. A strong performance in Africa could help the company save some blushes in the next financial results. The company posted good results in Africa in the July-September quarter as its revenues from the continent grew by 2.6% (2.8% adjusted for divestment of tower assets) to $782 million compared with $762 million in the corresponding quarter last year.

As on 30 September, the company had an aggregate customer base of 81.9 million users in Africa, as compared to 78.1 million in the corresponding quarter last year.

Data customers during the July-September quarter in Africa increased by 20.1% to 21.7 million as compared to 18.1 million in the corresponding quarter last year.