According to reports the losses of telecommunications company; Airtel Kenya, doubled in 2020 to 5.9 Billion Kenyan Shillings at a time when auditors expressed fears about the overall financial situation at the company after its total losses reached 77.41 Billion Kenyan Shillings.
The net liability position for Airtel Kenya hit 43.7 Billion Kenyan Shillings in the year which ended in December 2020. This is significantly higher than the net liability position of 37.78 Billion Kenyan Shillings that was the case in the year which ended in December 2019 further pointing towards a position that is insolvent.
In the financial year which ended on the 31st of March 2021 Airtel Kenya, experienced a major loss after halving the loss to 2.78 Billion in 2019 from 5.8 Billion that was the case in 2017. Its losses have however piled up over the years along with an increase in its debt load resulting in an uncertain financial position.
Airtel Kenya’s auditors; Deloitte stated that, “These conditions, along with other matters… indicate the existence of a material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern.”
The current financial position of Airtel Kenya is quite different from that of Safaricom which is the market leader. In the financial year which ended in December of 2020 Safaricom, announced a net profit of 68.67 Billion Kenyan Shillings. It was however, lower than the 73.65 Billion Kenyan Shillings it posted in the financial year prior.
For Safaricom the drop in profit was as a result of a corresponding drop in service revenue as well as increased costs incurred during the still ongoing Coronavirus pandemic and giving the telecommunications company its first full year fall in profit since 2012.
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The company’s directors made it known that they have secured a commitment from its major shareholder to get more funding in order to meet its obligations as the due date(s) draw nearer.
Airtel Kenya currently has a shareholder loan of 52.2 Billion Kenyan Shillings. This is up from the 46.6 Billion Kenyan Shillings that was the case in the previous year. According to its Directors with this, there will be “sufficient liquidity to manage its operations.”
The loans are reportedly from Airtel Kenya’s holding company; Bharti Airtel Kenya BV. Said loans are expected to be payable ‘on demand’ and are not secured, resulting in an interest charge of three (3) percent per year.
The Board made it known via a note coming with the financial statements that, “The directors are of the opinion that the company is a going concern on the basis of it generating cash flows of at least the management projections and also obtain additional funding from its shareholders required to meet its obligations.”
Airtel Kenya’s present negative asset position means that it would not have been able to cater to its financial obligations that would be due this year even if it decides to sell all of its assets that could readily be liquidated.
The note stated that, “The directors acknowledge that the continued existence of the company as a going concern depends on the outcomes of various strategic measures that the directors continue to pursue to return the company to profitability and continued financial support from the company’s shareholders and bankers.”
In the 2020 financial year Airtel Kenya’s borrowing increased to 9.23 Billion Kenyan Shillings. This was significantly higher than the 6.83 Billion Kenyan Shillings that was the case in 2019. Its net assets in foreign currencies also increased to 8.89 Billion Kenyan Shillings in 2020 as opposed to the 6.19 Billion Kenyan Shillings that was the case in the previous financial year.
In the 2020 financial year Airtel Kenya’s Net Foreign Currency Liabilities hit 56.17 Billion Kenyan Shillings up from the 49.85 Billion Kenyan Shillings that was the case in 2019.
Airtel Kenya secured 2.18 Billion Kenyan Shillings in new loans from JP Morgan Bank in 2020, along with loans it secured from Citi Bank (5.4 Billion Kenyan Shillings), HSBC-Mauritius (1.64 Billion Kenyan Shillings) and 1.7 Billion Kenyan Shillings in overdrafts and loans from Standard Chartered Bank.
Airtel Kenya also cleared its 1 Billion Kenyan Shillings loan from Stanbic Bank. As at March of 2021 its net borrowings were at 61.28 Billion Kenyan Shillings up from the 53.19 Billion Kenyan Shillings that was the case in the previous year.
Making it known that they were retired by the end of last year it said, “The current borrowings from HSBC-Mauritius and Standard Chartered Bank are repayable within twelve months to December 2021.”
Airtel Kenya’s overdraft facility with Standard Chartered Bank has an interest rate of 9.25 percent. By the 31st of December 2021 the overdrawn balance was 702.7 million Kenyan Shillings after doubling from the 361.3 million Kenyan Shillings that was the case in December of 2019.
The losses incurred by Airtel have gone deeper as a result of increases in finance costs, distribution costs, operating costs and administrative costs which ate up as much as 24.82 Billion Kenyan Shillings of the revenue generated by the telecommunications company.
This was an increase of 21.27 Billion Kenyan Shillings in expenses when compared to the expenses from the previous year.
Airtel’s revenues in 2020 increased by over 5.1 Billion Kenyan Shillings to stand at 26.41 Billion Kenyan Shillings. The growth was spearheaded by revenues from its voice service which hit 12.39 Billion Kenyan Shillings up from the 9.97 Billion Kenyan Shillings that was achieved in 2019.
In 2020 its revenues from data also increased to 7.79 Billion Kenyan Shillings up from 5.84 Billion Kenyan Shillings. For its interconnecting revenues it hit 2.6 Billion Kenyan Shillings in the same year (2020). This is significantly higher than the 2.1 Billion Kenyan Shillings that was the case in 2019.
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Airtel’s roaming revenues however, hit the largest drop to 116.9 million Kenyan Shillings in 2020 from the 281.74 million it hit in the previous year.
For its sale of goods like mobile devices and accessories Airtel’s revenues in that area rose to 69.37 million Kenyan Shillings. It was however lower than the 677.2 million Kenyan Shillings it hit in 2017. Observers believe that this might either be an indicator that Airtel’s business model for its shops is struggling or proof that the telecommunications company is gradually moving away from that side of its business.
Airtel which is Kenya’s second biggest telecommunications company also experienced an increase in its employee expense benefits to 1.73 Billion Kenyan Shillings which is higher than the 1.42 Billion Kenyan Shillings it hit in 2019. The growth was as a result of an increase of 101 million Kenyan Shillings in salaries and a total of 270 million Kenyan Shillings in other costs related to its staff.
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