Bharti Airtel to sell Burkina Faso, Sierra Leone operations to Orange

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New Delhi: Bharti Airtel Ltd on Wednesday said it will sell its operations in Burkina Faso and Sierra Leone to France-based telecom operator Orange.

The company did not disclose the size of the transaction, but analysts Mint spoke to estimated it at around $900 million.

The announcement comes six months after the two companies announced they were in talks on the sale of Bharti’s operations in these two countries, besides Chad and Congo Brazzaville.

“The agreements regarding potential transactions in the remaining two countries have lapsed,” Bharti said in a statement.

According to the agreement, the outlay for Orange for these transactions will be based on the financials of Bharti Airtel’s two subsidiaries for the last fiscal year and will represent the equivalent of 7.9 times Airtel’s EBITDA (earnings before interest, taxation, depreciation and amortisation) in these two countries at this time.

Orange will acquire 100% of the two companies’ share capital from Bharti Airtel International (Netherlands) BV, Bharti’s holding company for the Africa operations, acquired from Kuwait’s Zain in 2010.

“The consolidated revenue of the two companies is around €275 million. These acquisitions will be implemented in partnership with Orange’s subsidiaries in the Côte d’Ivoire and Senegal,” Bharti said, adding completion of the transactions remains subject to approval by the competent authorities. With the deal, Orange gets almost 5.5 million new customers and reaches a total of 20 countries in Africa.

“It’s a good deal. The fact they have been able to get this valuation in the current environment is a welcome news. They may have bought the operations at nine times, and sold it at a discount (7.9x), and the operations (of the countries Bharti has sold) are among the profitable ones in Africa; you have to remember that for Bharti’s Africa operations, it is no more about profit and more about exit,” said a Mumbai-based telecom analyst with a multinational brokerage firm.

As reported by Mint in July, Bharti is the market leader in these countries, which come under the francophone, or French speaking part of Bharti’s operations. Bharti had a net debt of $8.4 billion as on 31st March. The telco raised as much as $9 billion in debt for the Africa purchase in 2010.

Bharti Airtel’s Africa operations have missed internal targets of 100 million subscribers, up from 42 million at the time of acquisition, $5 billion in revenue, up from $3.6 billion, and $2 billion of Ebitda by March 2013, in less than three years after the acquisition. Two years after the targeted date, things are not much better. At the end of March, according to the latest earnings data available, Bharti Africa had a net loss of $585 million on revenue of $4.2 billion from its African operations.

Shares of Bharti Airtel fell 2.3% to Rs308.15 on BSE at 2:15pm, while the exchange’s benchmark Sensex gained 0.34% to 24,767.05 points.

Lazard and Société Générale were advisers to Orange for this transaction. Bharti Airtel was advised by Arma Partners LLP.

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