Airtel Africa begins new share buyback phase to cancel up to 12 million shares

Airtel Africa has announced a new phase of its share buyback program, aiming to buy and cancel up to 12 million of its ordinary shares by December 22, 2026. This is according to a new circular released today.

The company shared that this new initiative follows the completion of the first phase in September. Originally introduced in May, the program allows Airtel Africa to repurchase up to 1% of its total shares. After the first phase ended, about 0.33% or roughly 12 million shares were still available for buyback.

To manage these purchases, Airtel Africa has hired Citigroup (Citi), which will buy the shares on the market before transferring them back to Airtel Africa for cancellation. Once cancelled, these shares will no longer be counted as part of the company’s total issued shares.

This new buyback phase is set to continue until December 22, unless it finishes sooner. The company also noted that the share purchases will not occur on the Nigerian Exchange (NGX).

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What the Airtel Africa buyback means for shareholders

A share buyback occurs when a company decides to use its funds to repurchase its own shares from investors. Companies often pursue this strategy for several reasons, such as returning cash to shareholders and reducing the number of shares available in the market.

In the case of Airtel Africa, the shares that are bought back will be cancelled instead of being held for future use. Once this buyback is complete, the total number of outstanding shares will be reduced. This can increase the percentage of the company that remaining shareholders own.

For example, if a company has 100 shares and an investor owns 10 of those shares, they own 10% of the company. If the company then buys back and cancels 10 shares, there will only be 90 shares left, which means that the investor’s 10 shares now represent about 11.1% of the company.

For Airtel Africa shareholders, the impact will be less significant since the company is targeting to buy back about 0.33% of its total shares in this phase. However, with fewer shares on the market, the earnings per share (EPS) can improve. EPS shows how much profit each share receives. If the company’s profit remains unchanged while the number of shares decreases, the EPS can increase even without any rise in overall profit.

That being said, just because EPS goes up does not guarantee that share prices will rise or that all investors will see profits. The final results depend on various factors, including how much Airtel Africa pays for the shares, its overall financial performance, and how investors perceive the business.

So far, Airtel Africa has spent around $108.7 million to buy back and cancel 24.5 million shares in the first phase of this buyback plan, as mentioned in its half-year results. This initiative is part of a broader strategy to return cash to shareholders and manage the company’s capital effectively.

It is important to note that the money used for buybacks cannot be used for other investments, like expanding operations, launching new services, or reducing debt. Therefore, investors should weigh the buyback against the company’s overall financial health before making any decisions.

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