4 October 2017

Tanzania: Regulator Rejects Six Applications From Telcos to List On Dar Bourse

Photo: The Citizen
Dar es Salaam Stock Exchange.

Plans by telecommunications companies to list on the Dar es Salaam Stock Exchange seem to have been derailed by the Capital Markets and Securities Authority (CMSA), which has rejected six submitted prospectuses.

Tigo, Airtel, Halotel, Maxcom Africa Ltd, TTCL and Smart, which have applied to sell shares on the bourse through initial public offerings have had the applications rejected twice, for failing to fulfil certain requirements for listing.

According to CMSA public relations manager Charles Shirima, the applications from the six companies were not approved and the firms were asked to improve on them to meet requirements.

"The companies submitted their applications for the first time, but we told them to go back and improve them. They came for the second time; we reviewed them and still found out that they were not in compliance with the law," said Mr Shirima.

According to the CMSA, most of the applications were turned back because of shareholding disputes, lack of transparency, failure to provide full information as well as regulatory technicalities.

Mr Shirima said Tigo, the Tanzanian subsidiary of Sweden's Millicom, was turned away because of a shareholding case whose ruling is yet to be made.

The shareholders of Airtel, Indian telecoms giant Bharti Airtel, with a 60 per cent shareholding, and their partner, Government of Tanzania (40 per cent), have been wrangling over how many shares each side should offload to the public through the initial offering.

The company had proposed to raise about TSh25 billion ($11 million) through an IPO as the its net asset value stood at TSh100 billion ($44 million). However, it was first agreed that each shareholder should allocate 12.5 per cent of its shares for the IPO.

Legislation

Legislation compelling all telcos to float shares on the Tanzanian bourse was introduced in 2010. It remained inactive until 2016 when President John Magufuli ordered its implementation.

He hoped that, among other things, the mandatory listing would increase transparency in the telecom firms so that the public could reap dividends from one of Tanzania's fastest growing sectors.

The country's eight telecommunications operators are required by law to have 25 per cent local ownership.

The largest telco in Tanzania, Vodacom, became the first to list on the DSE mid this year, but it struggled to sell the 560 million shares on offer trading at Tsh850 ($0.4) even extending the deadline of the sale twice and opening up the IPO to foreign investors.

Lessons from Vodacom

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

The South African fund manager bought all the 224 million shares worth about $90 million allocated for foreigners after investors failed to take up the offer.

The corporation was said to have taken up the offer as an investment bank or institution that guarantees to purchase all unsubscribed shares after the IPO closes, at a fee.

The rest of the telecoms companies now have to do all they can to avoid the pitfalls that Vodacom faced, failing to trigger investor appetite as much as was expected due to what analysts said was lack of publicity, marketing and disclosures, among other reasons.

The government even extended loans to civil servants to allow the buy up the shares but they could still not meet the target.

According to experts, the rush to have all the telcos list about the same time could create the challenge of undersubscription because of the constrained capacity of the market to absorb the $213 million.

Although CMSA did not reveal the value of the six telcos, analysts believe that they may be close to TSh1 trillion ($445.4 million), five per cent of the current market capitalisation.

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