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Airtel Kenya sinks into insolvency as debt hits Ksh45b billion

Bharti's net debt stood at about US$12 billion (Ksh1.236 trillion) in January this year. 

BY MARTIN MWITA

Kenya’s second largest telcom operator by customer base-Airtel is insolvent, latest financial report reveals.

The telco closed the 2016 financial year with a Ksh8.1 billion loss after tax, a further dip from Ksh 7.1 billion loss recorded in 2014, pushing its net debt to Ksh45 billion.

The annual financial report published by its Delhi based parent company -Bharti Airtel -shows shareholder loans at its Kenyan subsidiary rose to Ksh37.6 billion in 2016, from Ksh31.4 billion in 2015, accounting for 68 per cent of the company’s total current liabilities.

Airtel Kenya’s current liabilities stand at above Ksh55.3 billion way above its current assets which are worth Ksh9.7 billion.

This indicates the telecommunication service provider is technically insolvent.

A company is technically insolvent when cash flows in a given period are greater than cash inflows, lacks the necessary liquidity to promptly pay its current debt obligations and its current ratio, an accounting standard used to measure liquidity position, and is less than 1.0.

Airtel’s current ratio stood at 0.18 as at December 2016.

The current situation means the company cannot meet its financial obligations even if it sold all assets that could be readily liquidated.

Airtel’s directors have however indicated that the company could still survive by achieving the target subscriber numbers and revenue.

The company’s subscriptions stood at 6.7 million as of September 2016, Communication Authority of Kenya data shows.

The directors have further indicated that plans are on to “obtain funding from third parties.”

They also expect further funding from shareholders.

Bharti Airtel had hoped to stabilise its operations in Kenya after the sale of its Kenya tower in 2015 for Ksh18 billion, which boosted Airtel Kenya’s  financials to close the year with a Ksh7.1 billion profit after tax.

The tower in Nairobi was among 3,500 towers Bharti Airtel offered on sale to tower management firm Eaton Towers, across its African network.

In January this year the Indian giant telco announced it was considering mergers or outright sales of some of its Africa operations, as a turnaround strategy to cut its overall debt and return to profitability.

The move will affect its operations in the 14 African countries it has a presence in.

Bharti’s net debt stood at about US$12 billion (Ksh1.236 trillion) in January this year.

Airtel ventured into the African market in 2010 with a US$9 billion (Ksh927.45 billion) deal with Kuwait’s largest mobile-phone operator Zain, but it has struggled to gain market share in the countries it operates in.

In Kenya, the telco has struggled to catch up with its bitter rival and market leader Safaricom, which is perceived to enjoy market dominance.

Safaricom’s subscription stood at above 26.6 million in quarter four of 2016.

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