Biggest bond sale on West African bourse to boost telecoms

• BusinessMetricsNG with wire report

An Orange SA West African subsidiary is issuing debt on the regional market for the first time to take advantage of higher demand for digital services amid the coronavirus pandemic.

The outbreak of Covid-19 and subsequent lockdowns has made a plan by Dakar-based Sonatel’s to raise 100 billion CFA ($171 million) particularly timely, Sekou Drame, Sonatel’s Chief Executive Officer said in an interview.

The bond sale is the largest in the history of the regional bourse, Bourse Regionale des Valeurs Mobilieres SA, or BRVM, according to Bloomberg report.

“The Covid-19 pandemic has strengthened our ambition,” Drame said. “We believe it’s now more than ever the moment to deploy this investment that will allow us to prepare our networks and platforms to handle even more traffic.”

Orange owns 42 per cent of Sonatel, the largest security on the BRVM, with a market value of 1.28 trillion CFA.

The carrier operates in Senegal, Guinea, Guinea-Bissau, Mali and Sierra Leone, while a sister company Orange Ivory Coast covers three other countries in the sub-region.

Paris-based Orange is considering acquisitions in Nigeria and South Africa and an expansion into Ethiopia to grow further in Africa in the wake of the pandemic, Stephane Richard, Chief Executive Officer told French newspaper Les Echos in an interview published Monday.

Sonatel started working on the debt issue before the coronavirus hit the region, Drame said, with the original focus on investing in mobile-finance projects among others.

“Sonatel has not really taken advantage of its sub-regional influence to address the financial market,” he said.“This is what we are trying to correct by also taking into account the evolution of the regulations on the prudential ratios of banks,” with Basel II and II expected to come into effect next year.

The company will now use the proceeds of the debt sale to expand its 4G and 4G+ networks and develop its energy, banking and Orange Money businesses.

“This is where we see our future growth,” Drame said. Orange’s Ivory Coast unit is launching Orange Bank later this year and the group plans to extend the banking operations to Sonatel countries, such as Senegal and Mali.

“Mobile-money penetration is around 35-40 per cent for most Sonatel companies,” John Davies, an analyst at Bloomberg Intelligence, said this week. “

That should increase with lockdown and social distancing as customers can’t meet to exchange cash,” he said. “Similarly, data and 4G have scope to grow, so spending on growth in 4G and Orange Bank looks sensible.”

Sonatel is the market leader in all but one of its five markets, Drame said in a presentation Wednesday. The company started a digital roadshow Thursday for its debt sale, with subscriptions open from June 15 to July 15.

“We’re still in a global pandemic that no doubt has had an impact on business,” he said, highlighting a decision to reduce the dividend. “In 2021, we hope to raise the dividends to our shareholders to the same levels as before.”