Company Trend Analysis - Orange Greatest Beneficiary Of Airtel Africa Pullback - JUNE 2017

BMI View: Airtel ' s reported withdrawal from six African markets is another step towards Orange dominating the region through a redistribution of assets. This will be too good an opportunity for Orange to overlook as it begins to push its mobile-based banking services across the region, although it will be wary of overpaying in markets where riva ls are better established or ones outside its preferred Francophone footprint.

Local media reports suggest that Airtel Africa is preparing to exit at least six underperforming markets. Chad, Congo-Brazzaville, Kenya, Niger, Rwanda and Tanzania are all at different stages of development, with Kenya and Tanzania being the most mature. However, all six are heavily dependent on low-cost prepaid services for expansion and will not easily be pulled out of the steep downward pricing spiral caused by Airtel and other new entrants that have emulated its strategy.

We believe cash-rich Orange has the financial resources to rescue the distressed Airtel businesses while its rich value-added services portfolio will be key to ensuring a sustainable turnaround. However, it will not be the only prospective bidder for the Airtel Africa units, as MTN could be persuaded to return to the expansion trail and Tigo could make selective purchases to bolster its footprint ahead of an eventual sale (most likely to Orange itself). South Africa-based Vodacom is also a potential bidder.

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