12 July 2017

Tanzania: Revealed - Airtel's IPO Pegged At Sh25 Billion

Photo: File photo/The Citizen
Airtel Tanzania headquarters in Dar es Salaam.

Dar es Salaam — Airtel Tanzania is expected to raise about Sh25 billion through its planned initial public offering (IPO), The Citizen understands. However, this is way below expectations given that the company commands a 26 per cent subscription market share, just six per cent less than the market leader, Vodacom Tanzania. It was thus expected that the Airtel IPO would have been pegged at hundreds of billions of shillings.

Airtel Tanzania's net asset value (NAV) is currently estimated at around Sh100 billion.

Under the Electronic and Postal Communications Act, 2010, as amended through the Finance Act, 2016, telecommunication firms are required to offload at least a 25 per cent stake to the public.

Airtel Tanzania's IPO plans come at a time when Vodacom Tanzania has extended its IPO by three weeks as it seeks new local and foreign investors in its Sh476 billion share offer.

This was after Parliament passed amendment of the Electronic and Postal Communications Act, 2010 during its just-ended sitting to allow foreign investors to take part in telecommunication firms' IPOs.

Telecommunications sector insiders and experts familiar with the latest capital markets developments told The Citizen yesterday that contrary to Vodacom Tanzania, Airtel Tanzania has been reporting losses for many years, thus reducing its balance sheet size.

"As far as I know, Airtel Tanzania's IPO will be about a twentieth of Vodacom's," said a source who preferred to remain anonymous because of the sensitivity of the matter.

According to the source, the fact that the company had been run by three different investors in the past 16 years had also had a negative impact on its balance sheet.

Airtel Tanzania was established in 2001 when the Netherlands-based Celtel International in partnership with Germany's Detecon invested a total of $60 million to acquire a 35 per cent stake in Tanzania Telecommunications Company Limited (TTCL).

In August 2005, Celtel Tanzania and TTCL were separated, allowing each to administer its own financial and business operations. Two years later, Kuwait-based Zain bought Celtel's parent company, MTC Group, and decided to unify its different brands across 22 countries, including Tanzania.

The government retained its 40 per cent stake.

Celtel Tanzania was thus rebranded Zain Tanzania, but the name existed for only three years before India's Bharti Airtel struck a deal in 2010 to acquire Zain's mobile operations in Tanzania and 14 other African countries.

That was how Airtel Tanzania came into being, with Bharti Airtel and the government holding 60 and 40 per cent stakes, respectively.

Analysts say these frequent acquisitions meant that each time the company was sold, the new investor also inherited debts and acquired new loans to inject more capital into operations.

"This means that all this time, Airtel Tanzania has had to repay loans in various forms of capital injection to its parent firms. As a result, the balance sheet was not as healthy as some people may have thought," said the source.

Meanwhile, capital markets authorities are in the final stages of approving Airtel Tanzania's prospectus ahead of its planned IPO.

The two shareholders - the government and India's Bharti Airtel - recently agreed to shed 12.5 per cent of their shareholding each through the IPO. This means that the government will remain with a 27.5 per cent stake, while Bharti Airtel will retain 47.5 per cent when 25 per cent of the firm is sold to the public.

On February 17, this year, President John Magufuli met the founder and chairman of Bharti Enterprises, the Indian billionaire Sunil Bharti Mittal, at State House in Dar es Salaam. Issues discussed included Airtel's business operations in the country, Airtel Tanzania said in a statement.

Mr Bharti Mittal expressed his willingness to list Airtel Tanzania at the Dar es Salaam Stock Exchange.

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