Airtel Tanzania:Auditor casts new doubt on viability of telecoms giant

22Aug 2018
By Financial Times Reporter
DAR ES SALAAM
Financial Times
Airtel Tanzania:Auditor casts new doubt on viability of telecoms giant
  • HEAVY JOB CUTS – The giant telecoms firm has slashed 40 per cent of its workforce over the past year as it continues to rely on capital injection from its majority shareholder to remain afloat

AN independent auditor has cast doubt on the survival of Airtel Tanzania Plc, the country's third-largest telecoms firm, as a going concern after the company's losses hovered near the 1 trillion-shilling mark last year and its liabilities exceeded its assets by close to 200 billion/-.

The company’s financial results for calendar year 2017 painted a gloomy picture, with accumulated losses rising to 967.8 billion/-, up from 857.9 billion/- a year ago.

Airtel Tanzania's independent auditor, Deloitte & Touche, is questioning the mobile network operator's viability after its liabilities continued to exceed its assets, hence threatening to effectively render the company insolvent.

"We draw attention ... to the financial statements which indicate that the company has incurred a net loss of 109.812 billion/- for the year ended 31 December 2017 (from a loss of 124.896 billion/- in 2016),” said the auditor in a report seen by the Financial Times.

Deloitte warned that Airtel Tanzania’s current liabilities exceeded its current assets by 189.234 billion/- last year, albeit down from 260.624 billion/- in 2016.

"These conditions, along with other matters ... indicate the existence of a material uncertainty that may cast significant doubt about the company's ability to continue as a going concern," the auditor noted.

However, Airtel Tanzania's board of directors said it was confident that the company would remain viable despite rising debts, thanks to its strong cash flow and a guarantee from its majority shareholder that it would continue to receive financial bailouts.

"The operations of the company continue to depend heavily on sources of financing from its direct and indirect parent companies," it said in its financial statements.

"The board of directors has reasonable expectation that the company has adequate support from the shareholders to continue in operational existence for the foreseeable future."

The board of directors said it has received a commitment from its majority shareholder, India’s Bharti Airtel, that it will continue to inject capital into Airtel Tanzania to keep the troubled company afloat.

Bharti Airtel owns a 60 per cent majority stake in the Tanzanian unit, with the remaining 40 per cent of the shares being held by the Tanzanian government.

Sharp workforce reduction

Airtel’s financial statements show that the company cut nearly 40 per cent of its workforce in just one year, as it struggles to cope with heavy losses.

The company said it reduced the size of its workforce from 354 employees in 2016 to 216 employees last year, in an apparent move to slash its wage bill.

As a result of the job cuts, the company said its employee benefit expenses fell to 34.77 billion/- last year from 42.43 billion/- in 2016.

The Tanzanian government and Bharti Airtel have been holding talks over the shareholding structure of Airtel Tanzania after the state last year claimed 100 per cent ownership of the loss-making telecoms firm.

President John Magufuli's government has publicly complained that it has not been receiving any dividends from its substantial shares in Airtel Tanzania.

The government is also pushing Airtel and other mobile network operators to file for initial public offerings (IPOs) at the Dar es Salaam Stock Exchange (DSE) to comply with mandatory regulations that require telecoms firms to list at least 25 per cent of their stake on the local bourse.

Vodacom Tanzania Plc is thus far the only mobile network operator to float its shares on the DSE.

Airtel Tanzania had 11.13 million mobile phone subscribers by June this year, making it the No.3 telecoms company in the country, behind Vodacom and Tigo.

The firm also boasts just above four million mobile money customers, trailing Vodacom (8.6 million clients) and Tigo (6.97 million users), according to latest data from the Tanzania Communications Regulatory Authority (TCRA).

Elsewhere in the East African region, Bharti Airtel's Ugandan unit posted a 30 per cent increase in profits last year to $62.12 million, from $44.9 million previously.

Like its Tanzanian counterpart, Airtel's Kenyan unit made a loss of $59.5 million last year, down from a loss of $79.4 million a year earlier.

By the end of last year, Airtel Kenya’s accumulated losses amounted to $652 million, up from $590 million previously.

Top Stories