The first of Tanzania’s telecoms operators goes public

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A requirement compelling Tanzania’s mobile operators to list a 25% stake of their companies on the local bourse should help boost equity trading.

Vodacom Tanzania, a subsidiary of the South Africa-based Vodacom Group, became the first telecoms operator to list on the Dar es Salaam Stock Exchange (DSE) after the partial sale of its shares was finalised in early August.

In early March the operator announced plans to offer 560m public shares, priced at TSh850 ($0.38) each, with a minimum purchase volume of 100 shares per investor, ultimately raising TSh476bn ($212m). Vodacom Tanzania stock gained 6% on its first day of trading, August 15, and shares were valued at TSh770 ($0.34) as of September 25.

Largest IPO in DSE’s history

Though it was twice delayed after its initial launch in March due to limited domestic interest, the sale was eventually opened up to foreign investors in June, helping make it the largest IPO in the exchange’s history.

While more than 40,000 local investors reportedly took part in the sale – many of whom were investing in the stock market for the first time – foreign investors ultimately accounted for 40% of the shares sold.

Mobile operators signal plans to list

Vodacom Tanzania will soon be joined on the stock exchange by several of its competitors. The second- and third-largest mobile operators in the country, Airtel Tanzania and Tigo Tanzania, have signalled their plans to list on the Enterprise Growth Market (EGM), Tanzania’s secondary market, having submitted their prospectuses to the Capital Markets and Securities Authority (CMSA) earlier this year. Together, Vodacom, Airtel and Tigo account for 85% of the country’s mobile subscribers.

According to local media reports from July, Airtel’s IPO could raise as much as TSh25bn ($11.1m). Its two shareholders, India’s Bharti Airtel and the government of Tanzania, have each agreed to float 12.5% stakes, leaving them with holdings of 47.5% and 27.5%, respectively, once the company is listed.

While Tigo Tanzania, a subsidiary of Swedish telecoms and media group Millicom International Cellular, has also announced its plans to list, local media reported in February that an ongoing ownership dispute has delayed its launch.

A fourth operator, the state-owned Tanzania Telecommunications Corporation, is undergoing a company restructuring following renationalisation last year, and has been given an extension to comply with listing requirements.

Government action spurs telecoms equity sales

The flurry of activity came after the government took action in 2016 to accelerate the partial listing of telecoms firms.

Under Tanzania’s Electronic and Postal Communications Act No. 3/2010, domestic telecoms companies are required to issue at least 25% of their shares on either the DSE or the EGM. Smaller IT and service companies are exempted from the requirement.

Firms were given a three-year grace period to comply, but the government used its Finance Act of 2016 to speed that process up, requiring all telecoms firms to begin the listing process within a six-month period starting July 1, 2016.

The IPO mandate has several aims, which include improving transparency and tax collection in the telecoms sector, offering new opportunities to private investors and boosting liquidity levels on the DSE, which saw a drop of TSh1.54trn ($685.9m) in market capitalisation last year on the back of market uncertainty caused in part by economic reforms and the 2015 elections.

Floatation could help improved stock market performance

However, there are early indications that developments such as the Vodacom listing are boosting activity on the DSE this year.

According to the CMSA, the market cap of domestic listed companies closed out the second quarter at TSh7.76trn ($3.5bn), up 3.3% from end-March. The increase was due to improvements in the share prices of key major listed companies, including Tanzania Breweries.

Market liquidity of domestic listed firms also rebounded significantly, as trading turnover climbed 55% quarter-on-quarter to hit TSh117bn ($52.1m).

There are still soft spots in the market. While the performance of domestic equities appears to be improving, the CMSA noted that total market capitalisation on the DSE fell by 1% to TSh19.3trn ($8.6bn) in the same quarter, while the All Share Index was down by 4% at 2217.08.

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