Tanzanians eye the MTN Uganda’s Sh2.7trillion IPO

Dar es Salaam. Tanzanian investors are keeping their fingers crossed so that all factors would remain constant to allow them participate in an Initial Public Offering (IPO) of MTN Uganda.

MTN Uganda will sell a fifth of its stake to East African investors when it floats its IPO at the Uganda Securities Exchange (USE) soon.

MTN Uganda said that its prospectus will be disclosed on October 11. However, the chief executive officer of Uganda’s Capital Markets Authority (CMA), Mr Keith Kalyegira, said the IPO was expected to raise about $1.2 billion (about Sh2.7 trillion).

“The intention to float the announcement is a major step towards delivering on our plan to list on the USE,” MTN Uganda chairman Charles Mbire told reporters.

This could be one of the few IPOs that Tanzanian investors are allowed to take part in after the country’s capital account liberalization.

Currently, Tanzania allows unrestricted foreign capital inflows except for non-residents of the East African countries who want to buy government securities” Treasuty bonds and bills.

The locals are also allowed to invest outside the country but those going beyond the East African Community (EAC) are required to get approvals from the central bank governor.

“Tanzanians can fully participate in IPOs of companies around the EAC without any restriction as it’s allowed under the East African Common Market Protocols,” said the Bank of Tanzania (BoT) director of economic research and policy, Dr Suleiman Misango.

He said the central bank was also engaging stakeholders in the ongoing process to review the foreign exchange regulations which restrict capital outflow beyond the EAC.

The public relations manager for the Capital Markets and Securities Authority (CMSA), Mr Charles Shirima, shared similar sentiments, noting that unless stated otherwise, there was no longer any restriction for Tanzanian investors to participate in IPOs.

He noted however that so far, there had been no official communication from MTN Uganda which would inform Tanzanian investors on the participation conditions.

“But, as far as I know, IPOs from across the EAC are open to all Tanzanian investors,” he said.

Besides Tanzania and Uganda, the other members of the EAC are Kenya, Rwanda, Burundi and South Sudan.

The IPO is expected to boost the number of retail investors at the USE from about 40,000 to 200,000.

The listing will make MTN Uganda the third publicly traded telecom in EAC after Kenya’s Safaricom and Tanzania’s Vodacom. The former was listed at the Nairobi Securities Exchange in 2008 while Vodacom Tanzania was listed at the Dar es Salaam Stock Exchange (DSE) in 2017.

“This will potentially be the largest IPO on the Ugandan market and will be delivered primarily through a digital paperless/ green platform which is the first of its kind in East Africa,” said MTN Uganda in a statement.

“The offer and listing of MTN Uganda is in line with MTN Group’s localisation plans to drive local ownership in the markets within which MTN operates,” the firm said.

The Ugandan government set the listing of telecoms on the local bourse as one of its licence renewal conditions to allow local ownership of big companies with few large shareholders.

MTN Group Ltd of South Africa owns more than 90 percent of the company’s shares, while a Ugandan businessman holds less than five percent shares.

MTN Uganda, which has 15 million subscribers, had its operating licence renewed for 12 years in February last year after paying $100 million with the local listing requirement as a precondition for the permit nod.

“We are delighted to witness the honouring of this commitment by MTN,” said Ms Irene Kaggwa-Sewankambo, the executive director of the Uganda Communications Commission.

The IPO reminds pundits of how Tanzanian investors missed out in 2008 when they were barred from taking part in Safaricom’s IPO which was however widely received in Kenya, Uganda, Rwanda and Burundi.

The BoT said then that Safaricom had not made any commitment to cross-listing at the Dar mart and thus the sought dispensation would be difficult to administer given the limitation on convertibility of EA currencies.

The BoT said then that in any case, piecemeal waivers would not address the fundamental issues on capital account liberalisation, but rather undermine transparency and market development.

Since then, there had been a number of initiatives to liberalise Tanzania’s capital account and in line with the EAC Common Market Protocol, a lot has been achieved so far.

The government established a gradual capital account liberalisation mechanism from 2014 when the government decided to raise the foreign participation in listed companies from 60 percent to 100 percent and allow EAC investors to buy up to 40 percent of the country’s Treasury Bills and Bonds.

Full liberalization was planned for 2015.