DSE explains why no other mobile firm has gone public

17Oct 2018
By Financial Times Reporter
Financial Times
DSE explains why no other mobile firm has gone public

THE Dar es Salaam Stock Exchange (DSE) has cited legal wrangles and ownership disputes as some of the reasons that have prevented the listing of major mobile companies which are yet to go public as required by law.

The trading of shares of these companies is eagerly awaited because it will be a tremendous boost to the fortunes of the nascent bourse whose market capitalisation went up nearly 2trn/- by the Vodacom Tanzania listing in August last year.

With the Tigo Tanzania ownership row now over, expectations are high in the capital markets with both regulators and investors upbeat of the huge business prospects and commercial benefits to be derived from its listing. Immediately after the settlement of the matter in July, the company said it was ready for an initial public offering (IPO), which to date has not been announced.

In a recent interview with the Financial Times, DSE chief executive officer Moremi Marwa said Airtel Tanzania was another mobile network operator (MNO) whose listing was principally marred by an ownership wrangle.  In this case, the government is disputing Bharti Airtel’s 60 per cent ownership of the business obtained during the privatisation of TTCL.

According to Marwa, DSE had also received listing applications for Zantel and Halotel Tanzania in compliance with the Electronic and Postal Communications Act No.3 (EPOCA) of 2010. The law requires all telecommunication companies to offer at least 25 per cent of their shares for sale through DSE.

So far only Vodacom has complied with the law, after selling all the 560 million floated shares that raised 476bn/- in its IPO, which has been the highest in the 20-year history of the exchange. Marwa said the listing of Vodacom shares was one of the decisive factors in the good performance of the stock mart particularly in the growth of market capitalisation in 2017.

“We have four applications from telcos in compliance with EPOCA, which was amended by the Finance Act 2017. Some of the issues we have raised which should be addressed before they can be listed are about their legal status and ownership negotiations between shareholders,” he explained.

The top DSE official was referring to the Tigo case, which has now been concluded, and the Bharti-government decision to settle their differences out of court. The talks between the two shareholders of Airtel Tanzania to discuss ownership of the company began in March this year.

In July, the Appeal Court ruled that Luxembourg-based Millicom was Tigo Tanzania’s rightful owner, dismissing a case by Geneva-based Golden Globe International Services Ltd. and Quality Group Ltd. of Tanzania that laid claim to 99 percent of the company. The two told the court they acquired 34,479 shares in Tigo Tanzania’s holding company MIC Tanzania Ltd. in 2014.

“So whether in court or in negotiations, it is until those legal and ownership issues have been addressed can we be able to proceed with processing the listing applications of the concerned companies. And this is important because the public should know the current ownership arrangements before they buy shares during IPOs,” Marwa told Financial Times.

Zantel and Halotel have no ownership disputes but their applications also have issues that should be sorted out before they are allowed to go public. Marwa said once they comply with requirements to trade shares they will be allowed to do IPOs and then get listed.

Through the Finance Bill, 2016, Tanzania amended the Electronic and Postal Communications Act of 2010, compelling all electronic and communication companies registered in the country to float their shares to the public and subsequently list them on the DSE.

The law was again amended in 2017 to allow foreigners to participate in the IPOs of the telcos after the initial wanting performance of Vodacom shares sale. The move paid off as the IPO was fully subscribed with foreigners, initially banned from participating, buying 40 per cent of the shares.

The Vodacom offer period was extended twice by the Capital and Securities Market Authority (CMSA) leading to 40,000 people buying the shares. The offer had initially been restricted to Tanzanians.

“The listing of Vodacom shares played a big role in the positive performance of the DSE in terms of market capitalisation which is one of the factors we consider when measuring growth of the market. The other factors in measuring growth are the number of listings and liquidity outturn,” Marwa said.

Apart from Vodacom, the other listing in 2017 was flotation of shares of TCCIA Investment Company. In 2016, five listings took place, namely, Mucoba Bank Plc, Mkombozi Commercial Bank, Mwalimu Commercial Bank, Yetu Microfinance and DSE Plc.

Marwa said that equity turnover amounted to 517bn/- last year compared to 421bn/- in 2016. In terms of bonds trading, he said the market liquidity increased to 683bn/- in 2017 from the previous year’s outturn of 428bn/-.

According to him, the total market capitalization of the bourse during the two years went up by about 2trn/- from 19.1trn/- to 23.1trn/-. Marwa attributed the surge to mainly the Vodacom listing and increment in the prices of the listed shares.

The Vodacom shares also played a key role in the domestic market capitalization, which caters for only local listed companies. The market value increased by almost 3trn/- from 7.7trn/- to 10.3trn/- during the two years.

“The number one factor behind this growth was the listing of Vodacom, which alone contributed 1.9trn/- in market capitalization as well as the increment in prices of domestic listed companies,” Marwa told the Financial Times.

The CEO’s Quarterly Note for the third quarter says that the total market capitalization for all 28 listed equities decreased by 7.7 per cent (about 1.69trn/-) from around 21.98trn/- as of June 30, 2018, to about 20.29trn/- at the end of quartet three. The report says that the decline was mainly driven by the decrease in prices for some domestic listed companies as well as most of the cross-listed equities.