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Vodacom pushes out Tanzania IPO date

By , ITWeb
Tanzania , 19 Apr 2017

Vodacom pushes out Tanzania IPO date

Vodacom is extending the offer period for its initial public offering (IPO) on the Dar es Salaam Stock Exchange (DSE) in Tanzania.

Vodacom Tanzania MD Ian Ferrao told ITWeb from Dar es Salaam that investors will have another three weeks to subscribe for shares in the company.

"Vodacom Tanzania expects a continued influx of applications for shares during the course of this week. Also, following consultation with the government of Tanzania and the respective investment communities, including members of Parliament, groups of civil servants and officials of the constituent member organisations of the Tanzania Federation of Cooperatives, we have requested and received approval from the CMSA [Capital Markets & Securities Authority] to extend the offer period by three weeks to Thursday, 11 May," he says.

The offer on the DSE was due to close today but media reports last week already indicated the IPO was under-subscribed.

"This extension will help ensure full participation by retail and institutional investors, who have requested more time. We thank all Tanzanian investors that have participated in the initial offer period to date and look forward to welcoming further new shareholders shortly," Ferrao adds.

He says the allotment of shares is now proposed to take place from 19 May onwards, with an expected final listing on the DSE by early June.

The planned listing comes after the Parliament of Tanzania last June amended regulation to make it mandatory for licensed telecommunications operators to list at least 25% of their authorised share capital on the DSE, to boost domestic ownership.

Vodacom plans to raise R2.8 billion through the listing, which would be Tanzania's biggest IPO to date. Last month, the telco confirmed with ITWeb that the CMSA had approved Vodacom Tanzania's prospectus ahead of the IPO and had approved the telco offering 560 million shares to the public at 850 Tanzanian shillings (R4.99) per share. The CMSA valued Vodacom Tanzania's 25% stake at Tzs 476 billion (R2.8 billion).

The SA-based company is currently only listed on the Johannesburg Stock Exchange. Vodacom Tanzania was launched in 2000 and is the group's second biggest market, with 12.4 million active subscribers as at 31 December 2016.

Tigo Tanzania − a subsidiary of Swedish telecoms and media group Millicom − and the local unit of India's Bharti Airtel have also both filed IPO prospectuses with the CMSA.

Developing interest

"Vodacom Tanzania's IPO being under-subscribed is symptomatic of still developing equity markets not only in Tanzania but also in a couple of African markets. There is not an engrained culture of investing on stock markets and this IPO being a signature offer should have been well marketed to drive interest," according to George Kalebaila, director for telecoms and Internet of things in Africa at IDC.

Richard Hurst, director of enterprise research at Africa Analysis, says an under-subscription could indicate there is a lack of investor interest in the proposed listing.

"The major problem to emerge from this scenario will be that the entity being listed will not be able to reach its funding objective," he adds.

"It will be important for the operator and the government in that a successful IPO will demonstrate investor confidence in the company, and the economic policies and path the government is taking. A further element of importance is that a successful IPO will enable the entity to use the capital generated from the IPO to invest in its business and grow revenues, etc," says Hurst.

Kalebaila says if the IPO fails, it will not necessarily hurt Vodacom but more the Tanzanian government's intentions, as it might discourage other big organisations to go the same route.

"It also might force a rethink of the 25% local ownership. Equity markets need time to develop and I think 25% is rather ambitious as there is limited equity in local hands waiting to be invested. That's why you see the shareholding structure of a couple of large organisations favour wealthy and politically connected individuals who have access to capital," Kalebaila adds.

Foreign investment

Foreigners are currently unable to take part in the share sale because of Tanzanian domestic ownership rules. However, Bloomberg quoted CMSA spokesperson Charles Shirima last month saying that while the authority was optimistic domestic investors would absorb all of the shares, it may consider opening up the offer to foreigners if it was under-subscribed.

"The way things stand now, it will be inevitable to open the IPO to foreign investors, although this will be the last thing the government would want to do as it will fly in the face of local empowerment," Kalebaila says.

"For an IPO of this magnitude to be successful, you need to open it to foreign investors, even from greater East Africa for starters, because Kenya's stock market is far more developed than Tanzania's," he adds.

Hurst agrees that if the market was more open and foreign investors were allowed to invest, there would be a different scale in terms of uptake for the IPO.

"However, the original objective was to ensure the licensed telecommunications operators would be listed and that Tanzanian citizens would be able to take some ownership of these operators. Perhaps a different approach may be needed when it comes to this sort of listing and regulatory requirements," concludes Hurst.

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