20 August 2017

East Africa: After Tanzania Listing, Vodacom Has Largest Share of Telcom Sector in EA

South Africa's Vodacom Group has taken a controlling stake in East Africa's telecommunications sector after its Tanzanian subsidiary successfully listed on the Dar es Salaam Stock Exchange (DSE) last Tuesday, a week after the parent firm completed acquisition of 35 per cent of Safaricom shares.

Vodacom Tanzania is now the second largest firm in Tanzania by market value after Acacia Mining.

Last week, Vodacom completed its largest ever acquisition in the region's leading telecommunication firm, Safaricom, buying shares worth $2.6 billion.

"This transaction, which is the largest in our history, will now allow our shareholders to access a strong performing business in East Africa in a high growth market. We now expect this transaction to enhance our position as a leading African mobile communications company, providing the group with the perfect opportunity to diversify our financial profile," Till Streichert, Vodacom's chief finance officer said.

Foreign investors

On its debut at the DSE, Vodacom Tanzania shares rose nearly six per cent above its issue price. This was, however, a modest rise compared with IPOs of cement manufacturers.

"This increase is lower than those of previous IPOs, which doubled in price on their debut. However, it is a good start as it offers investors a broader choice of portfolios in the market," said George Fumbuka, chief executive officer of Dar es Salaam-based Core Securities.

The telco's shares started trading on Tuesday, closing the day at $0.4 (Tsh900), which was 5.88 per cent higher than its $0.37 (Tsh850) listing price.

The firm successfully raised $213 million last week, having extended its IPO twice, and after allowing foreign investors to get a 40 per cent stake.

"We are pleased with what we have achieved through this IPO process making Vodacom Tanzania the second most valuable company by market capitalisation listed on the DSE," Vodacom chief executive officer Shameel Joosub said, adding that this significantly boosts local participation in the country's capital market.

South Africa's Public Investment Corporation (PIC), which accounts for about 12.5 per cent of the market capitalisation at the Johannesburg Stock Exchange, is believed to have been the main driver in the purchase of the 40 per cent shares allocated to foreigners in the Vodacom Tanzania IPO.

Zitto Kabwe, an opposition MP and the head of Alliance for Change and Transparency party, was quoted saying that PIC bought $80 million worth of Vodacom Tanzania shares.

Analysts say that the listing will now offer Vodacom Tanzania a competitive advantage in terms of capital acquisition that will see it cement its position as Tanzania's leading telco.

"The listing, viewed outside of the forced element by the government, is a blessing in disguise for the firm, as it now allows it to access funds without accumulating debt. It is a clever way of financing," said George Mkenga, a research analyst for telecoms and media at Tivos Consumer Ideas in Dar es Salaam.

"We will now see its ability to expand its coverage within Tanzania, introduce new products as this internal source of financing is now viable under the prevailing economic and interest rate conditions.

"It will be interesting to see what direction its operations in Uganda will take now that its sister companies are listed in Kenya and Tanzania."

Vodacom becomes the first telecommunication firm in Tanzania to list on the DSE following a government directive to have all telecoms companies to list at least 25 per cent of their shares locally.

President John Magufuli's administration is hoping that the mandatory listing will improve these firms' transparency and also allow the public to enjoy the dividends from one of the country's fastest-growing sectors.

Second most capitalised

It is now expected that India's Bharti Airtel and Tigo, which have already submitted prospectuses to Tanzania's Capital Markets and Securities Authority will receive approvals for their IPO and list before the year ends.

The Tanzanian subsidiary's listing at the DSE, however, falls short of its Kenyan sister firm, Safaricom's first day of trading at the Nairobi Securities Exchange in 2008 where its share price rose by 50 per cent to Ksh7.50 ($0.07) at the end of the day from its listing price of Ksh5 ($0.05).

The IPO also saw more than 860,000 Kenyans buy into the firm through its shares as compared to Vodacom's 40,000 Tanzanians.

The listing of Vodacom, and its being the second most capitalised firm is now expected to boost the DSE's performance this year.

The DSE market capitalisation currently stands at $8.5 million as compared to $9.6 million the previous year, according to its half-year report.

The domestic market capitalisation stands at $3.42 million, down from $3.49 million last year, while the All Shares Index at the end of last month was 2,217.08, compared with 2,481.99 points the previous year.

The Tanzania Share Index has also recorded a drop to 3,692.03, from 3,706.15. The report also showed that the turnover from shares sold by foreign investors also recorded a huge drop to $53,652 in the last six months as compared to $1 million over a similar period last year.

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