Tanzania's Telecoms seen reluctant to list on Dar Stock Exchange

Image result for telecom towers tanzaniaThe National Microfinance Bank, Tanzania Breweries and Tanzania Cigarette are the top most taxpaying entities in the country and those listed on Dar es Salaam Stock Exchange (DSE).

The three are paying over 50bn/- each annually. And sources say through listing, a factor that increases transparency, made the three firms stay at the top of the list.

All three firms were once state owned before they were privatised. TBL and TCC were not doing badly before privatisation, but NMB was reportedly on the edge of bankruptcy.

The companies that are main shareholders in NMB, TBL and TCC are all listed in their respective countries and the whole idea of listing to them is not new.

Realising the need to increase transparency and tax potential from mobile tele-service providers and mining companies drafted a law, known as Electronic and Postal Communications Act (EPOCA).

The EPOCA outlines tele-providers responsibilities in a number of areas, including technical standards, interconnections and access, co-location, listing and infrastructure sharing.

One of the provisions of EPOCA, a five year old law, requires mobile phones service providers to sell some of their shares and list into the local stock market - DSE after three years of operations in the country.

However, for the tele-companies to list, a provision in the Act requires the Minister of Science and Technology to prepare regulations that will enable such a sale of shares to locals through Initial Public Offering (IPO) and subsequently list on the bourse.

Some of the stock exchange stakeholders have it that the Ministry might sign the regulations next month, thus paving way for IPO of these companies to DSE - either on the main or second window (EGM). The ministry, however, has yet to confirm this.

The DSE Chief Executive Officer, Mr Moremi Marwa, said recently that the minister was still doing consultations with various stakeholders on the matter.

“My recent discussion with the ministry, I was told that the regulations might be signed by the minister by April, this year,” Mr Marwa said.

However, other stakeholders from ministry, telecoms, government officials to Members of Parliament (MPs), have it that there is major resistance by the telecoms to implement this five-year old provision of the EPOCA law.

They have indicated that they are not willing to subscribe into mandatory listing as stipulated in the law, they rather want to off-load their part of their shares and list into the exchange voluntarily and at their pace moved by operational and strategic business decisions.

The disturbing phenomenal was that some of the government officials were also reportedly bending towards this direction. But while the telecoms are hesitating to list into DSE, they are listed on their home countries - Airtel, for example, is listed on two exchanges in India, Bombay Stock Exchange and National Stock Exchange of India Limited.

Vodacom is listed on JSE Limited, previously Johannesburg Stock Exchange Limited - the largest stock exchange in Africa located in South Africa. Tigo the brand name of Millicom is listed into NASDAQ OMX Stockholm, Sweden.

The DSE CEO said that the spirit of this provision of law, which is to enable broader economic empowerment to local Tanzanians through ownership of shares in major sectors of the economy through public offerings.

 Also to facilitate growth of the local capital markets, by listing of companies operating in the telecom industry - will facilitate in making the market more deep and liquid, which will then entice other sectors to follow through because of good valuations and proper pricing mechanism.

And the last thing, according to Mr Marwa, other countries have done the same and have significantly enabled local citizens being economically empowered such as Iraq and Bahrain have just recently implemented a law similar to ours.

However, the CEO said people have been misguided into believing that the country bourse is somehow too small for telecoms to mandatorily list into the exchange.

“Let me make this clear: For whoever pays attention to the local exchange, they may have noted that our market has recently improved significantly,” Mr Marwa said. The depth - market size - is now 24tri/-, market liquidity (turnover) averages 400bn/- and valuations of Price Earnings Ratio (PE) of 17 times in 2014.

Just two years ago the DSE’s market depth was 14tri/-, annual average turnover of 50bn/- and PE Ratios were less than 10 times. On top of that Pension Funds, insurance companies and other portfolio fund managers are always on the lookout for IPO to invest into and they don’t find them, they end up investing in fixed deposits, government papers and properties.

“So if telecoms decided or will be mandated to list - the potential liquidity to absorb, say the recommended 35 per cent is equivalent to a combine 850 million US dollars (Barclays Report) for the four major telecoms won’t be a significant challenge as some of us are convinced to believe,” Mr Marwa said.

The CEO believes that the market can absorb the 35 per cent of four IPO of telecom as there will be enough space in between. Vodacom Tanzania paid 47.1bn/- corporate tax last year, meaning the country’s largest mobile phone company was among the most profitable corporations locally.

However, the amount is lower than the third taxpayer NMB that paid 54bn/- in 2013 and 68bn/- last year. Analysts said the telecoms are generating a lot of revenue.

The taxes paid are not reflecting the actual money they were generating. They urged that if last year 10 billion short text messages were exchanged and paid 20/- as taxes, the amount paid come to a whooping 200bn/-.
Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania
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