Companies

Airtel saves Sh2.5bn on taxes as earnings improve

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

Airtel’s Kenya business has saved $21 million (Sh2.5 billion) in taxes after making the initial recognition of a deferred tax credit on its books, helping its parent firm Airtel Africa to grow its earnings by 25 percent in the quarter ended June 2022.

The decision to utilise the tax credit—which was accrued due to past years of losses— is an indication that the profitability of the Kenya business has now improved.

Airtel Africa, while not giving the breakdown of the performance of its Kenyan unit, pointed at a 14.1 percent jump in voice and mobile money revenue in its East Africa business.

This, combined with an 18 percent improvement in Nigeria's sales, underpinned an overall growth of 13 percent in revenue for the group to $1.26 billion (Sh150 billion).

The multinational's total tax charges were $19 million (Sh2.26 billion) lower at $98 million (Sh11.6 billion) mainly due to the Kenyan tax credit. Net earnings thus rose by a quarter to $178 million (Sh21.1 billion) for the telco.

“Basic earnings per share (EPS) improved to 4.4 cents (Sh5.22), while EPS before exceptional items improved to 3.8 cents (Sh4.5) The increase in basic EPS was mainly due to higher operating profits and the initial recognition of the deferred tax credit in Kenya, which more than offset foreign exchange and derivative losses,” said Airtel Africa in its results update.

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

In May, Airtel Kenya paid the sector regulator Communications Authority of Kenya (CA) $5 million (Sh594 million) as part payment for its operating and spectrum licence running from 2015 to 2025.

The initial payment was an outcome of an out-of-court settlement with the government following a protracted dispute over licence fee claims, where the telco agreed to pay $20 million (Sh2.38 billion) in four instalments over three years.

The telco has also been paying for additional capacity in recent months, starting with a $10 million (Sh1.18 billion) payment in March for a network licence it will be allowed to use for 10 years to cater for the increased demand for its mobile data services.

On July 25, Airtel Africa disclosed that its Kenyan unit had paid the CA $40 million (Sh4.75 billion) for a licence on additional fourth-generation (4G) Internet services in the country—60 MHz of additional spectrum in the 2600 MHz band.

The licence is valid from July 2022 for a period of 15 years, the telecoms firm said, deepening the pivot toward data services as a driver for growth in the market.

Airtel Kenya launched 4G Internet services in the country in 2018, and is riding on the additional spectrum to support capacity expansion for both mobile data and fixed wireless home broadband, as well as future 5G rollout.

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