Malawi: Renowned Telecom Engineer Mtumbuka Encourages Malawians to Buy Airtel Shares

16 January 2020

One of the towering figures in the telecom industry has cleared the mist on the Airtel largest Initial Public Offer (IPO) sale on the Malawi Stock Exchange (MSE), saying the telecom company is on the strong financial footing.

Dr Mathews Mtumbuka, who worked for Airtel for eight years including one year at Airtel Rwanda and three years at the Africa Head Office, has since encouraged Malawians to buy the 20 percent shares in the mobile phone company.

"When you analyse a telecom business you normally start by looking at EBDITA (both the absolute value and the margin or %ge).

"Basically this is the profit before tax, depreciation etc. And then that figure as a percentage of the revenue," said Mtumbuka.

Airtel Malawi is offering a total of 2.2 billion shares at a price of K12.69 per share on the Malawi Stock Exchange, allowing the public for the first time to own part of the telecommunications firm.

Mtumbuka says the published IPO Prospectus of Airtel indicates that in 2017, their EBDITA was MK31.5 bn and MK37.2 bn in 2018, with margins of 40.7% and 43.9% respectively.

He said many good telecom companies would have EBDITA margins in ranges of roughly 30 to 35% saying beyond 40% is simply extraordinary.

" This means basically that the company has a good customer base, makes good cash and most importantly means the company is so lean and efficient on its cost structure. There is very little room for further improvement on EBDITA margin as its nearing optimisation levels," he said.

Mtumbuka said investment experts will estimate the real price of a telecom company based on its EBDITA figures and he personally had numerous discussions with top investors.

"The MK12.69 share price is a significantly discounted price. Probability of gain in the near future is very high," he said.

Mtumbuka concedes the current liabilities are high but says Airtel has explained that the number is inflated due to a loan from the Bank of America which is due mid this year.

He said the company officials have further explained that the loan will be reorganised and then once it becomes longer than current term, immediately the net current liabilities figure will be in line with the local industry.

"For me that explanation makes a lot of sense especially when you read that Airtel has recently invested approx MK50 bn in modernising their network including providing 4G technology in all their towers," he said.

On fears that Airtel Money is not part of the package, Mtumbuka says the computation of the figures has not included Airtel Money business.

Secondly, he says the business without Airtel Money is big and good enough.

"Thirdly, Airtel Mobile Commerce Ltd was established as a separate company aged ago... at least when I was joining Airtel in 2011 I found it as a separate legal e entity just that for operational efficiency, there was a lot of combinations and coordination with the main GSM business. In any case, I expect Airtel Malawi to get some income from Airtel Money in terms of staffing that helps out plus the components of the network that support the Airtel money business," Mtumbuka said.

Similarly, he says the Towers Company was split ages ago.

He said in fact he had the privilege of being on the Board of Directors of the Airtel Towers from around 2011 or 12 till nearly his exit time.

"That is a preferred way of running the telco business and is a common practice in this trade just like some banks will have the Forex Bureau as a separate entity! Remember also very importantly that the tower company only covers what we call the passive network. The entire and much bigger active network is still part of Airtel. Call the Towers like legs while the active network includes the brain, heart and other organs of the network," he said.

Airtel was forced to float its 20% shares to locals to meet the Malawi laws and has engaged Standard Bank plc to act as book runner and as lead transaction adviser for the company.

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