January 08 -2018 – Uganda will expect major telecommunications companies operating in the country to list 30pc of their stock on the local bourse under a sweeping new policy intended to align operations in the sector with market realities.
The target are the two major mobile telephone players – MTN and Airtel who between them control 92pc of the Ugandan telecom market.
Under the policy that was adopted by cabinet in September and will guide the sector for the next five years, the ICT ministry sees listing as an opportunity to boost local ownership of the sector and to dampen capital occasion by repatriation of profits and dividends.
Listing on the local bourse, will become a licensing condition for incumbent and prospective telecommunications operators in the sector that boasted 23.6 million mobile telephone subscribers by June 2017.
“Considering the contribution of Ugandans to the telecom companies’ success, it is economically and politically beneficial to give Ugandans the opportunity to become shareholders in their Ugandan operations. This action has been taken in Ghana, Nigeria, Tanzania, and Zambia,” the ministry says in its justification for the proposal.
Citing data from UCC’s annual market and industry report for 2017, the ministry says the telecommunications sector had expanded in value with the value of mobile money transactions reaching UGX 28.208 trillion in fiscal 2016/17 which was almost equal to allocation under the national budget. The ministry further notes that two of the top five tax payers in Uganda are telecom companies which besides contributing in excess of UGX 600 billion in tax revenues to, also repatriate more that $250 million to their to their offshore shareholders.
Citing the benefits of listing, the ministry says that improved financial reporting standards that are a prerequisite for listing would result in increased tax collections from the sector. Retention of more earnings would also reduce the cyclical pressure on the local unit since part of the dividends will now be settled in local currency.
“The listing of telecom companies will ease the process of Uganda’s inclusion in the frontier market category of the Morgan Stanley Capital International (MSCI) index, together with other African countries like Kenya, Morocco, Mauritius, Nigeria, and Tunisia,” the policy states in part.
As a first step, the telecom companies will first have to convert into public companies, then proceed to offer 30pc of their stock through a primary offer that will be ring-fenced for Ugandans and citizens and institutions of East African Community member states.
In event of undersubscription, the listing telecom will be allowed to make a secondary that will be open to all potential investors after two to three years.
The government believes the share offer will attract more than 50,000 retail investors to participate in the IPO.
The Ugandan move appears to be inspired by Ghana and Tanzania which have taken a similar path over the past three years.
Although the idea has been floated before, telecoms have resisted the move arguing that listing should be a shareholder and not policy driven decision.