Airtel Africa has signalled that it expects its Kenyan unit to return to profitability in the near-term, saying this is the basis for its recent utilisation of deferred tax assets deriving from past losses from the Kenyan business.

The telco, courtesy of making losses running into billions of shillings over the years, had built up the tax credits to use in the future to lower its tax bill.

The company started using the credits in the quarter that ended in June, and by the end of the half-year to September the cumulative amount utilised stood at $42 million (Sh5.1 billion).

London-listed Airtel Africa did not give a breakdown of the profitability of the Kenyan unit for the half year period, but it said that its East Africa business reported a 12.4 percent revenue growth in voice and SMS services in the review period.

Separate disclosures by its ultimate parent firm Bharti Airtel Limited, however, showed that Airtel Networks Kenya made a larger net loss of Sh1.7 billion in the year ended December 2021 on higher costs.

Tax Credits

The decision to start utilising the tax credits this year, therefore, indicates that the performance of the Kenyan business has improved compared to last year, as Airtel Africa alluded to in its statements in the September results.

“Considering Airtel Kenya’s profitability trends, that tax losses have recently been utilised and on the basis of forecast future taxable profits, the group has determined that it is now probable that taxable profits will be available against which the tax losses and temporary differences can be utilised,” said Airtel Africa in the September filings.

“Consequently, the deferred tax asset recognition criteria are met, leading to the recognition of an additional deferred tax asset of $42 million during the six months ended 30 September 2022.”

Largest Market By Revenue

Kenya is one of the largest markets by revenue for a multinational firm in the continent after Nigeria.Previous disclosures have shown that the business has been saddled with high finance costs as it relies heavily on loans while racing to break even in a market where only Safaricom is profitable.

Airtel’s revenues are about five percent of Safaricom’s sales, highlighting the large gap between the market leader and its two rivals in the telecoms sector. Airtel Africa. however, remains confident about the future prospects of the Kenya business, going by recent heavy investments in acquiring extra capacity for the unit.

In May, Airtel Networks Kenya paid the sector regulator Communications Authority of Kenya (CA) an instalment of $5 million (Sh609 million) as part payment for its operating and spectrum licence running from 2015 to 2025.

The telco has also been paying for additional capacity in recent months, starting with a $10 million (Sh1.22 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 (Sh4.9 billion) for a licence on additional fourth-generation (4G) Internet services in the country —60 MHz of additional spectrum in the 2600 MHz band.