Companies

Airtel books additional Sh2.5bn in tax savings

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Airtel Kenya Ltd headquarters located along Mombasa Road, Nairobi. FILE PHOTO | DENNIS ONSONGO | NMG

Airtel Kenya used up an additional Sh2.5 billion ($20 million) worth of deferred tax credits on its books to save on payments due to the taxman in the quarter ending December 2022, pointing to a return to profitability in the near term.

Financial disclosures by the company’s London-listed parent firm Airtel Africa for the nine months ended December 2022 show that the cumulative saving on tax payments as a result of utilising the deferred tax credits hit $62 million (Sh7.7 billion) in the period, up from $42 million (Sh5.2 billion) in the six months to September.

The telco has made losses running into billions of shillings over the years, building up credits to use in the future to lower its tax bill.

“Total tax charges were lower by $72 million mainly due to the initial recognition of a deferred tax credit of $62 million in Kenya,” Airtel Africa said of its tax bill in the nine-month period.

“Operating profit of $1.318 billion, grew by 15.1 percent as a result of strong revenue growth and continued improvements in operating efficiency in East Africa and Francophone Africa.”

Read: Airtel eats into Safaricom voice market dominance

Airtel Africa’s total tax bill was $278 million in the review period, down 20.6 percent from $350 million a year earlier mainly due to the Kenyan tax credit. It also helped the company grow its net profit by 1.7 percent to $523 million.

In its September 2022 filings, the company said that the tax losses had been utilised on the basis of forecast future taxable profits and that the group had “determined that it is now probable that taxable profits will be available against which the tax losses and temporary differences can be utilised.”

It started using the credits in the quarter that ended June, indicating that the performance of the Kenyan business has improved compared to last year.

Airtel’s revenues are about five percent of Safaricom’s sales, highlighting the gap between Kenya’s leading telco and its two rivals Airtel and Telkom Kenya.

Airtel Africa did not give the breakdown of the revenue share generated from the Kenya business, but it noted that its East African business recorded a growth of 11.9 percent in voice revenue and 32.5 percent in mobile money earnings.

Data revenue from the region, the company said, went up by 20.8 percent on the expansion of its 4G network which helped grow its customer base and data usage.

The Kenya unit has seen a flurry of regulatory actions in the past year, mainly on payment of licence fees, decoupling of the mobile money business and acquisition of an additional 4G mobile spectrum.

Read: Airtel takes Sh23 billion IFC loan for mobile internet

The recent heavy investments in acquiring the extra capacity for the unit are indicative of Airtel Africa’s confidence in the future prospects of the Kenya business.

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