Airtel Africa’s stock debut among worst in Europe this year

Bloomberg

Bharti Airtel Ltd’s Africa unit plunged in London trading after raising about $750 million in an initial public offering, making it among the worst debuts on European exchanges this year.
Airtel Africa Ltd dropped as much as 16 percent to 67 pence per share, matching the first-day decline for OssDsign AB last month. Airtel Africa said it had priced the offering at 80 pence a share, at the low end of its range, giving the company a market capitalisation of about 3.1 billion pounds ($3.93 billion).
The weak market showing for the African carrier, the continent’s second-largest by subscribers, comes as parent Bharti Airtel struggles back home with a years-long price war and mounting debt.
Proceeds from the IPO will help the India-based wireless operator pare debt while it prepares to upgrade its mobile network to fifth-generation technology.
Airtel Africa may be suffering from broader investor unease about telecom carriers in emerging markets, said Ally McKinnon, a fund manager at Scottish Investment Trust who didn’t participate in the IPO.
Phone companies were popular during the investment boom in so-called BRIC stocks — from Brazil, Russia, India and China — but they can be at risk of state intervention, he said, citing Johannesburg-based MTN Group Ltd’s battle against multibillion-dollar claims by Nigerian authorities over taxes and fines.
“Once you’ve got the network built, you’re vulnerable because you’ve got assets in the country, you’re a big company that makes money, or makes cash flow at least,” McKinnon said.
Alastair Jones, an analyst at New Street Research, had flagged concerns about Airtel Africa in the run-up to the IPO tied to the company’s network investment and its exposure to Nigeria — given MTN’s troubles there — as well as Airtel’s slightly weaker market position relative to rivals.
“Clearly it’s a more difficult market at the moment for African telcos,” said Jones, who doesn’t have a rating on Airtel, in an interview.
In a statement before the start of trading, Airtel Africa Chief Executive Officer Raghunath Mandava said the IPO was a proud moment for the company.