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why Bharti Airtel buys Tigo Rwanda

Bharti Airtel Ltd has entered into a definitive agreement with Millicom International Cellular S.A., under which Airtel Rwanda Ltd will acquire 100% equity in Tigo Rwanda Ltd, the operator said in a statement on Tuesday.

This comes after Airtel’s announcement to merge with Millicom, which operates the brand Tigo, in another African nation Ghana.

Over the past few years, Airtel has been trying to make a mark in Africa through local acquisitions. Airtel acquired assets in Uganda, Congo, Kenya and consolidated operations in Ghana.

Through the latest acquisition, Airtel will position itself as a strong number 2 operator in Rwanda, the statement said. The existing customers of Tigo Rwanda will join Airtel’s network.

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

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.

Back home in India, Airtel has been facing pressure on margins and revenue after the entry of Reliance Jio, which offered services free for almost seven months and later announced rock bottom tariffs.

The company is expected to face pressure on its financial results in October-December as a result of a cut in the interconnect usage charge from 14 paise a minute to 6 paise a minute. Net revenue from interconnect usage charge contributes to 4% of Bharti Airtel’s consolidated Ebitda. A good performance in Africa could help the company save some blushes in the next financial results.

At 10.48am, shares of Bharti Airtel traded 0.98% lower at Rs521 on BSE, while the Sensex was up 0.31% at 33,707.33 points.

The Express News

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