Airtel market activity remains flat despite posting Shs296b profit

The Airtel share price remained flat at Shs87 yesterday, two days after the telecom declared a profit return of Shs296b for the year ended December 2023.  

Airtel, which was listed on the Uganda Securities Exchange (USE) on November 7 last year, has not attracted sufficient activity, forcing its stock to drop to Shs87 from the IPO Shs100 offer price. 

The drop has been consistent since the telecom listed on the USE on November 7, resulting from subdued market activity with more investors showing willingness to sell, amid low demand. 

People familiar with Airtel’s stock activity, but declined to be named to speak freely, said the value of shares traded so far since Airtel’s listing is Shs60m, which is way less than the total value of its listed shares of more than Shs200b. 

“This shows you that some commanding investors haven’t traded and this has a minimal impact on the overall share price value. But we might see investors reacting to the dividend Airtel just declared,” a stockbroker said. 

Airtel had, in its prospectus, projected a profit of Shs457b, but noted that investments and an increase in operations costs had eaten into its profit margins realizing only Shs296b in the period under review. 

For instance, in details contained in the financial report, Airtel indicated that it had registered a 56.64 percent increase in access charges, which rose to Shs66b, while investment in network infrastructure rose to Shs360b.  

Access charges are paid to another telecom for use of its network infrastructure. They occur when a customer from one telecom accesses services or networks provided by another company.

“Globally, the intercom charges are going down, but when the volume of interconnect goes up, then the ultimate cost goes up. When an Airtel user calls an MTN line, Airtel pays a cost for use of MTN’s network infrastructure, and vice versa. So, of late, we have seen this increase,” Mr David Birungi, the Airtel public relations manager, said in an email yesterday.

In November, Airtel told its shareholders that a sizable capital investment would be necessary, but indicated the investment may not yield the best return unless the company can secure additional spectrum. 

“With its current radio spectrum holdings, the company can only effectively serve a small portion of the nation with voice and data services,” Airtel noted in its IPO prospectus.

It was not immediately clear whether Airtel had obtained more spectrum.  

The telecom also indicated that during the period network operating expenses, which increased to Shs314.5b in 2023 from Shs251.4b, were the major expenses incurred in 2023, pushing net expenses to Shs1.192 trillion from Shs984b.  

Mr Birungi said network operating costs were largely driven by the addition of 399 new sites, noting that the telecom continues to invest in its network to meet stringent requirements under quality of services.  The National Telecom Operator license that Airtel holds requires it to provide network coverage that spans at least 90 percent of Uganda’s landmass. 

However, the telecom registered an increase in revenue to Shs1.74 trillion from Shs1.59 trillion, pushing up its asset value to Shs2.2 trillion from Shs1.97 trillion in 2022.

Airtel also indicated in a notice that it would pay shareholders a dividend of Shs2.15 per share, or a combined Shs86b for shareholders on the company books by March 26. 

Expanding network capacity

Last year, Airtel told investors that to expand network capacity ahead of growing customer demand and technological advancements, its capital expenditure may exceed commercially feasible levels.

Airtel Uganda depends on several third parties to manage, maintain, and operate its telecom network, among which include equipment manufacturers or technology providers such as ZTE, Huawei, Bandwidth, and Cloud Services Group. 

The telecom also uses third parties such as ATC to supply network co-location facilities that are integrated into its network and to manage and maintain its information technology platform. 

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