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Saturday, June 25, 2022

Airtel Nigeria $7.11bn Enterprise Value More Valuable Than Africa Peers

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Airtel Nigeria’s enterprise value, which is seen by investors as a more accurate gauge of a company’s worth than the more commonly cited market value, now stands at $7.11 billion (N2.91 trillion), according to a report by Chapel Hill Denham Limited.

That makes the telecommunication giant the most valuable firm among parent company Airtel Africa Plc subsidiaries or regions as the East Africa region has an enterprise value of $4.59 billion and Francophone, $2.38 billion, respectively.

Enterprise value gives a snapshot of what it would cost, theoretically, to buy a company. It is calculated by adding market value, debt, preferred equity and minority interest, and subtracting cash and investments.

Airtel Nigeria has always been the cash cow and greatest contributor to Airtel Africa’s smartphone penetration, a fast-growing young population, low banking penetration, and fast rising demand for data continues to strengthen earnings.

Airtel Nigeria further deepened its sales and distribution network on the back of accelerated network and increased momentum of 4G infrastructure.

Nigeria’s operations contributed 40 percent of Group (Airtel Africa) revenue, and that compares with the East Africa region, (35 percent), and Francophone Africa, (25 percent).

In terms of earnings before interest taxation depreciation and amortization (EBITDA), Nigeria has the lion share with 48.90 percent, East Africa, (38.90 percent), and Francophone, (19.20 percent).

With the outlook for data consumption and data money strong on the back of supportive regulations for mobile operators to take part in financial services ecosystems, Airtel Nigeria is on track for growth.

The largest telecommunication giants (MTN Nigeria, 9mobile, Glo, Airtel Nigeria) in Africa’s largest economy benefited from the lockdown imposed by the government to curb the spread of the coronavirus pandemic as data subscription surged on the back of torrent of video conferencing and webinar meeting.

Also, there was an upsurge in online tutorials, and older generations, who were used to physical newspapers for information, migrated to the online to glimpse the latest stories on politics and entertainment.

The fourth quarter 2020 GDP report by the National Bureau of Statistics (NBS) showed the telecommunications and Information Services sub sector output was up 17.64 percent compared with a 17.36 percent growth in the third 2020).

The sector continues to benefit from increased internet & smartphone penetration, fledgling social media culture which has been amplified by the increased adoption of telecommuting by Nigerian corporates.

Airtel Nigeria has an enterprise value to earnings before interest and taxation, depreciation, and amortization (EV/EBITDA) ratio of 8.20 times earnings, lower than the emerging market telecoms average of 9.70 times earnings, which means the firm is attractive for investment.

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