Renowned telecom engineer Mtumbuka encourages Malawians to buy Airtel shares
One of the towering figures in the telecom industry has cleared the mist on the Airtel largest Initial Public Offer (IPO) sale on the Malawi Stock Exchange (MSE), saying the telecom company is on the strong financial footing.
Dr Mathews Mtumbuka, who worked for Airtel for eight years including one year at Airtel Rwanda and three years at the Africa Head Office, has since encouraged Malawians to buy the 20 percent shares in the mobile phone company.
“When you analyse a telecom business you normally start by looking at EBDITA (both the absolute value and the margin or %ge).
“Basically this is the profit before tax, depreciation etc. And then that figure as a percentage of the revenue,” said Mtumbuka.
Airtel Malawi is offering a total of 2.2 billion shares at a price of K12.69 per share on the Malawi Stock Exchange, allowing the public for the first time to own part of the telecommunications firm.
Mtumbuka says the published IPO Prospectus of Airtel indicates that in 2017, their EBDITA was MK31.5 bn and MK37.2 bn in 2018, with margins of 40.7% and 43.9% respectively.
He said many good telecom companies would have EBDITA margins in ranges of roughly 30 to 35% saying beyond 40% is simply extraordinary.
” This means basically that the company has a good customer base, makes good cash and most importantly means the company is so lean and efficient on its cost structure. There is very little room for further improvement on EBDITA margin as its nearing optimisation levels,” he said.
Mtumbuka said investment experts will estimate the real price of a telecom company based on its EBDITA figures and he personally had numerous discussions with top investors.
“The MK12.69 share price is a significantly discounted price. Probability of gain in the near future is very high,” he said.
Mtumbuka concedes the current liabilities are high but says Airtel has explained that the number is inflated due to a loan from the Bank of America which is due mid this year.
He said the company officials have further explained that the loan will be reorganised and then once it becomes longer than current term, immediately the net current liabilities figure will be in line with the local industry.
“For me that explanation makes a lot of sense especially when you read that Airtel has recently invested approx MK50 bn in modernising their network including providing 4G technology in all their towers,” he said.
On fears that Airtel Money is not part of the package, Mtumbuka says the computation of the figures has not included Airtel Money business.
Secondly, he says the business without Airtel Money is big and good enough.
“Thirdly, Airtel Mobile Commerce Ltd was established as a separate company aged ago…at least when I was joining Airtel in 2011 I found it as a separate legal e entity just that for operational efficiency, there was a lot of combinations and coordination with the main GSM business. In any case, I expect Airtel Malawi to get some income from Airtel Money in terms of staffing that helps out plus the components of the network that support the Airtel money business,” Mtumbuka said.
Similarly, he says the Towers Company was split ages ago.
He said in fact he had the privilege of being on the Board of Directors of the Airtel Towers from around 2011 or 12 till nearly his exit time.
“That is a preferred way of running the telco business and is a common practice in this trade just like some banks will have the Forex Bureau as a separate entity! Remember also very importantly that the tower company only covers what we call the passive network. The entire and much bigger active network is still part of Airtel. Call the Towers like legs while the active network includes the brain, heart and other organs of the network,” he said.
Airtel was forced to float its 20% shares to locals to meet the Malawi laws and has engaged Standard Bank plc to act as book runner and as lead transaction adviser for the company.
That is the Matthews I know. This guy is super genius! I was privileged to work under him as my Board Chairperson elsewhere. I learnt a lot from him. We both enjoyed our trips to Edinburgh; Glasgow in Scotland kikikikikiki.
It’s good that someone who knows Airtel well has come out bravely to share a unique side of the story. Now we have a full view. Some were just making theoretical noise without deep knowledge of the telecom industry. Its impressive how Dr Mtumbuka has articulated complex matters in a very simple manner for us all to understand and then make our own choices. Bravo Chief! Enawa just forgive them…Malawi ndi chonco. Pull him down syndrome
This guy loves to hear himself talk. He is exactly like Henry Kachaje. Heed their advice at your own personal financial risk and ruin.
But we investors need such inputs….. Enanu Kwanu nkutukwana ndi nsanje…. you will discourage people in future to share with us valuable information. If you dont agree with Dr Mtumbuka then just keep quiet or make your professional opinion and analysis like he has done. You are just calling him names and none of you has engaged him on facts he has provided. You have just exposed your UMBULI and Nsanje. Ife tamva ndipo tikagula!
Buy the shares by all means, at 12.69 per share. Mark my words the share price will remain static if not gradually reducing in value,
Remember TNM shares when the public was duped!
The owners have unbundled the business’s assets and are basically offering 20% of the remaining skeleton. The owners have retained 100% in the profitable assets ie airtel money and airtel malawi towers. Buying these shares will only result in 10tambala return on 1269 tambalas invested per share. bear in mind that EBITDA is easily manipulated by a single journal entry rendering any analysis useless. And why are the share offer proceeds not being reinvested? I know some local lawyers and accountants will making millions out of selling these shares at the expense of the public who will have no chance… Read more »
The figures in their financial statements do not back your claim that Airtel money and tower are the most profitable assets.
It is talk time and data which is extremely profitable.
Do not confuse the public.
The figures in their financial statements do not back your claim that Airtel money and tower are the most profitable assets.
It is talk time and data which is extremely profitable.
Do not confuse the public.
Asking the question: why Airtel is not reinvesting the proceeds is strange.
Airtel current investors are selling 20% of shares to meet licensing requirements. So it’s is existing shareholders that are selling 20% of their stake to other new shareholders. If they took the proceeds from the sales to reinvest in the company, airtel would have to issue fresh shares worthy K25bn+. The question then would be: would they have sold the 20% of the company in such scenario?
Mtumbuka has argued using facts and figures. Those opposing him here are attacking him personally. Can they engage on the facts and figures he has outlined so we can appreciate their side also.and make informed decision. Else those opposing are just wasting their and our precious time.
Cellphone companies sell all their products for cash up front. Talk of air time, data …
This is an industry that is so liquid that it can use current liabilities to finance long term assets, and dispite the mismatch, remain very profitable and sustainable, while growing at a very healthy rate.
Let us all be very clear with the nature of company and industry we are dealing with and not compare apples with mangoes.
Enanu you make noise but you haven’t even read the article nor the original post by Dr Mtumbuka! Nsanje basi. A Malawi ndi chonco! Ine ndawerenga and I find great value in the article and the piece that Matthews wrote. Now I need someone to help me with cash ndikagule ma shares basi. Ngati muli ndi mtila gayileni!
Kataye ma Kwacha akowo m’madzimo, Mphwanga.
This is now comforting. I just hope Airtel can also float the Airtel Money company in the future tizagulenso ma shares amenewonso!