An Airtel shop in Nairobi. FILE PHOTO | NMG Airtel Kenya’s auditors have raised the red flag on the company’s financial health after the telecommunications firm posted a Sh2.89 billion loss last year, raising its cumulative losses to Sh68.09 billion.
Airtel, which is in merger negotiations with the government-owned Telkom Kenya, is now insolvent to the tune of Sh8.14 billion after the gap between its liabilities and assets widened further from the Sh2.86 billion recorded in 2017.
The firm halved its annual loss from Sh5.8 billion in 2017, but losses accumulated over the years and an increasing debt load pushed the company into a precarious financial position.
“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,” warns Airtel’s auditors Deloitte.
The company’s weak financial position is in sharp contrast to market leader Safaricom, which posted a record Sh63.4 billion after-tax profit in the last financial year ended March 31.
Airtel is awaiting regulatory approvals to merge with Telkom Kenya, the country’s third-largest telecommunications firm.
The firm’s losses deepened on the back of increased operating, finance, administrative and distribution costs, gobbling close to Sh22 billion of the telco’s revenue.
Its distribution costs jumped to Sh250.6 million from Sh55.6 million in 2017, partly driven by arbitration talks it had entered into with some of its distributors in 2015 after they filed a lawsuit challenging its commission rates.
Sharp decline
Revenue from the sale of goods (accessories and handsets) recorded a sharp decline to Sh45 million from Sh677.2 million in 2017, pointing to either a struggling Airtel shops business model, or the firm’s shift away from that business line.
The negative asset position means Airtel would have been unable to meet its financial obligations maturing this year, even if it sold all assets that could be readily liquidated.“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,” states the board in a note accompanying the financial statements.The directors say they have obtained a commitment from its major shareholder to obtain additional funding to meet its obligations as they fall due.The telco has seen a rise in its shareholder loans to Sh47.5 billion in 2018, up from Sh43.4 […]
