Here’s my top FTSE 100 telecoms stock (and it’s not Vodafone or BT)

Airtel Africa (LSE:AAF) won’t be probably the most well-known title on the FTSE 100, however its share value efficiency over the previous 5 years has been nothing wanting outstanding.

Since October 2021, the telecoms group has seen its market-cap almost treble. It’s the kind of consequence that may make shareholders in BT and Vodafone, one other two Footsie shares within the sector, extraordinarily jealous. However I don’t suppose the celebration’s over but…

What’s been occurring these days?

In October, the corporate individually listed its cash division, formally referred to as Airtel Cellular Commerce. It gives a monetary companies platform that permits customers to ship, obtain, and retailer cash instantly on their cell phones without having a standard checking account. In rural Africa, it’s been an actual recreation changer.

Airtel Africa retains a 77.85% curiosity within the enterprise, which at the moment (2 November) has a market-cap of £5.08bn. Airtel Africa itself is valued at £9.94bn. That is very near the group’s pre-separation valuation. In different phrases, spinning out its cash enterprise has had no influence. Not but, anyway.

Alternatively…

Nevertheless, trying forward, I believe it could possibly be a wise transfer. Traditionally, telecoms firms have attracted decrease valuations than different sectors. However Airtel Cash is extra akin to a rapidly-growing know-how firm. Certainly, its first set of outcomes as a standalone entity had been spectacular.

Through the six months to 30 September, buyer numbers elevated 18.7% to 56.7m. And in comparison with the identical interval a yr earlier, income was 34% larger. Primary earnings per share (EPS) jumped 21.1%.

Moreover, the corporate declared its first dividend and is aiming to return an enormous 80% of earnings to shareholders annually. After all, payouts are by no means assured.

However the remainder of the Airtel Africa enterprise can be doing properly. On Friday (30 October), for the primary six months of the yr, the group reported a 23.3% improve in EPS and a 26.7% rise in web money from working actions. General, buyer numbers grew by 11.6% to 193.6m.

Nevertheless, the group faces quite a lot of challenges as doing enterprise in Africa isn’t simple. There are all types of forex and political dangers. And telecoms infrastructure is dear, which may result in massive borrowings.

Prime of the store

Regardless of this, Airtel Africa stays my favorite FTSE 100 telecoms inventory. Crucially, it isn’t as indebted as its two Footsie friends, who’re extra reliant on European markets the place competitors’s fierce and the return on capital is decrease.

Considerably, Airtel Africa’s uncovered to a continent that’s anticipated to see its inhabitants double in measurement by 2070. And with an approximate 60% of individuals aged below 25, it’s the youngest continent on Earth.

Cellular connectivity’s now an important a part of trendy life. For my part, Airtel Africa’s working in the fitting sector in the fitting place on the proper time. However in addition to it’s doing, there’s nonetheless one other 80% of the African grownup (over-15s) inhabitants to focus on.

Personally, I believe this makes Airtel Africa an thrilling alternative to think about. Nevertheless it’s only one development inventory that’s not too long ago caught my consideration…

What development inventory will we like higher than Airtel Africa Plc proper now?

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James Beard owns shares in Airtel Africa plc and Airtel Cellular Commerce N.V.