July 22, 2024

Airtel market activity remains flat despite posting Shs296b profit

The Airtel share price remained unchanged at Shs87 yesterday, following the telecom’s announcement of a profit return of Shs296b for the year ended December 2023.

Airtel, which began trading on the Uganda Securities Exchange (USE) on November 7 last year, has experienced limited activity, causing its stock to decline to Shs87 from the IPO offer price of Shs100.

This downward trend has persisted since the company’s listing on the USE, driven by subdued market activity and increased selling by investors amidst low demand.

Individuals familiar with Airtel’s stock activity, who chose to remain anonymous, stated that the total value of shares traded since the listing is only Shs60m, significantly lower than the total value of its listed shares, which exceeds Shs200b.

According to a stockbroker, the lack of trading by major investors has had minimal impact on the overall share price, but the recent declaration of dividends by Airtel may prompt investor reactions.

Airtel had initially projected a profit of Shs457b in its prospectus but attributed the lower realized profit of Shs296b to investments and increased operational costs.

Specifically, the financial report highlighted a 56.64 percent increase in access charges, reaching Shs66b, and a rise in network infrastructure investment to Shs360b.

Access charges represent payments made to other telecoms for utilizing their network infrastructure when customers access services or networks provided by other companies.

Airtel’s Public Relations Manager, Mr. David Birungi, explained that despite global decreases in interconnect charges, increased interconnect volume leads to higher costs. He emphasized that when Airtel users call MTN lines, Airtel incurs costs for using MTN’s network infrastructure, and vice versa.

In November, Airtel informed shareholders that significant capital investment would be required, particularly if additional spectrum is not secured.

The company highlighted in its IPO prospectus that with its current radio spectrum holdings, it can effectively serve only a small portion of the nation with voice and data services.

Regarding expenses, Airtel noted that network operating expenses rose to Shs314.5b in 2023 from Shs251.4b, primarily due to the addition of 399 new sites.

However, despite these challenges, Airtel saw an increase in revenue to Shs1.74 trillion from Shs1.59 trillion, resulting in an asset value rise to Shs2.2 trillion from Shs1.97 trillion in 2022.

Airtel also announced it would pay shareholders a dividend of Shs2.15 per share, totaling Shs86b for shareholders on the company’s books by March 26.

In terms of network expansion, Airtel emphasized the need to exceed commercially feasible capital expenditure levels to accommodate growing customer demand and technological advancements.

Airtel Uganda relies on third-party providers like ZTE, Huawei, Bandwidth, and Cloud Services Group for managing, maintaining, and operating its telecom network. Additionally, third parties like ATC supply network co-location facilities integrated into its network and manage its information technology platform.

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