Tanzania Opens Telecom IPOs to Foreigners

14 July 2017

Mergers, Acquisitions and Financial Results

Tanzania will allow foreign investors to buy shares in telecommunications companies listing on the domestic stock exchange, after an initial public offering by the country’s biggest mobile operator stalled.

Changes will be introduced in the legislation currently before parliament, Finance Minister Philip Mpango told lawmakers Thursday in the capital, Dodoma.

“We want to open up the mandate of companies listing 25 percent of their shares to allow Tanzanians, Tanzanian companies, Tanzanians in the diaspora, joint ventures between Tanzanians and foreigners, East Africans or companies owned by East Africans, or citizens from other countries,” Mpango said.

Tanzania in June 2016 enacted a law requiring phone companies to sell at least a quarter of their units in the country on the Dar es Salaam Stock Exchange to boost domestic ownership. Foreign investors were barred from participating. Vodacom Tanzania Ltd., a unit of Johannesburg-based Vodacom Group, began an IPO in March that was extended by three weeks to allow investors more time to participate. It has yet to announce the results of the 476 billion-shilling ($213 million) offering, and postponed its listing date from May to June.

“We are now doing it the way it should’ve been done,” said George Fumbuka, chief executive officer at Dar es Salaam-based Core Securities. “I can understand trying to give special treatment for locals, but in the stock market it should be open market.”

Aggressive Valuations

Other companies required to list include the local units of India’s Bharti Airtel Ltd. and Luxembourg-based Millicom International Cellular SA.

The combined estimated value of new listings is about $1 billion, a sum that would be difficult for local investors to absorb given the current Dar es Salaam Stock Exchange’s market capitalization of about $8.4 billion, according to Harrison Gitau, a research analyst at Nairobi-based ApexAfrica Capital.

There will be “less aggression” in the valuations of new IPOs coming to the market, according to Fumbuka. “Personally, I think Vodacom was overpriced,” he said. “With the open market, companies will price IPOs more competitively.”

 Amendments to the law will also exempt small telecommunications companies with application services from listing and limit the IPOs to businesses with network facilities and services, Mpango said.

Tanzania’s telecommunications industry was worth about $996 million by the end of 2016, Vodacom said in its prospectus, citing estimates by International Data Corp.

Source: Bloomberg