Share repurchase from the Nigerian Exchange could turn to a festival as companies seek reward for strong earnings performance and less volatile stocks, some analysts told MarketForces Africa while answering what could prompt Airtel Africa latest market move.
According to a statement submitted to the Nigerian Exchange, Airtel Africa seeks to buy out 8.27% minority stake in its Nigerian subsidiary -Airtel Networks Limited with an open offer to all shareholders at a price of N55.81 per share.
Dubbed as the third largest player in the telecommunication segment of the Nigerian economy, Airtel share price movement often shakes the very fabrics of the domestic bourse. The telecom company worth N3.856 trillion on Friday at a unit price of N760, gained more than 6% from N715 per share at the beginning of the week.
Broadstreet analysts polled by MarketForces Africa said the board could be considering the volatility in the Nigerian bourse. After staying negative for months, the stock market return moved into a positive number as the all-share index crossed 40,000 points.
It had underperformed the benchmark since early in the year amidst selling rallies. This was driven in part by an uptick in fixed income yields in the first half of 2021. With the announcement, Airtel Africa shareholders record a hefty increase which could potentially add up for total returns on their portfolio.
In its equity note, Meristem Securities said in the event that all minority shareholders tender their shares at the offer price, this transaction will cost the parent company up to US$148.10 million. The amount needed as consideration for the share repurchase represents 23.89% of the Group’s total cash as of the first quarter of 2022.
Meristem said while mobile voice remains the Group’s primary source of revenue (50.54%), there has been an increasing focus on data, driven by the recent expansion of its 4G networks and other non-voice offerings.
In the first quarter of its financial year 2022 earnings scorecard, Airtel recorded $562 million revenue from voice business. This was followed by $356 million revenue generated from data services while mobile money contributed $124 million and $98 additional revenue was recorded from other sources.
Analysts said there has also been an increasing popularity of the Group’s mobile money services- Airtel Money- among customers outside Nigeria, contributing 12.18% to total revenue.
Operation of the Airtel money business is yet to commence in Nigeria, as the group awaits the approval of its Payment Service Bank (PSB) license. Airtel Networks Limited (Airtel Nigeria) is a subsidiary of Airtel Africa and contributes c.40.02% to the Group’s revenue, Meristem said.
Analysts said in the review that Airtel Nigeria accounts for 33.86% of the Group’s customer base, making it the Group’s biggest market. The parent company currently holds a 91.73% equity stake in Airtel Nigeria, while minority stakeholders hold the remaining 8.27%.
Airtel Nigeria is the third-largest telecommunications service provider in the country, with a subscriber base of 50.86 million as of August 2021, which represents 26.91% of the total market share, Meristem said in a review.
In the first quarter of 2022 result
Airtel Africa’s revenue grew by 30.7% to $1.112 billion, driven by constant currency growth of 33.1% partially offset by currency devaluations, mainly in the Nigerian naira (6%) and Zambian kwacha (24.2%), in turn partially offset by appreciation in the Central African franc (6.6%) and Ugandan shilling (5.3%).
The company said revenue growth for the quarter partially benefitted from a weakened performance in the first quarter of the prior year during the peak period of Covid-19 related restrictions across the region.
Even after adjusting for this, revenue growth rates were ahead of the fourth quarter of the financial year 2021 trends for the Group, and across all reporting regions and service segments, it added.
Analysts also noted that 8.34% increase in its customer base to 120.8 million subscribers and average revenue per user growth by 19.23% as contributing factors to the improvement seen in its topline performance.
The Group’s revenue sees an average annual growth rate of 10.33% in the past five years, supported by solid subscribe.
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