Are Tanzania's telecoms ready to go public?

Regulations and rules for listing of telecommunications firms on the Dar es Salaam Stock Exchange (DSE) are ready on the table but the government wants to consult stakeholders to make sure the listing attains the desired objectives.

The Minister for Communication, Science and Technology, Prof Makame Mbarawa, said he needed to engage further all the stakeholders to make sure the planned listing of telecoms on DSE was not going to be counterproductive.

“Regulations are on my table but as a minister responsible, I want to be extremely careful to avoid mistakes that may disrupt the whole exercise, he said in an interview.

The government enacted the Electronic and Postal Communications Act of 2010 to enforce listing of the telecoms on the bourse to enable broader economic empowerment to local Tanzanians through ownership of shares in one of Africa’s fastest growing industries.

The listing is also expected to facilitate growth and deepening of the local capital market, boost the value of the bourse and improve corporate governance and transparency.

The law requires the Minister responsible for communication to prepare rules and regulations that provide for minimum shareholding requirement and listing arrangements.

Prof Mbarawa said they had studied experiences of Egypt, Qatar and Kenya on the listing of telecoms and were keen to avoid mistakes that would make the exercise counterproductive.

“This is very tricky. If we are not careful, we may find the objective to enable Tanzanians take a stake in the ownership of these firms is not attained,” he said citing an example of a leading telecomm company in a neighbouring country which listed on the stock market and the local people bought the shares only to sell them to foreign investors after a short while.

He said other important issues they were evaluating were whether to make the listing mandatory or not, and the capacity of the DSE to absorb all the telecoms once they are listed on the bourse.

“Is it going to be compulsory for them to list or not? What about the capacity of DSE to accommodate all the firms? What is going to happen about the operation of the market after listing. These are some of the issues we must look at carefully,” he said.

The minister noted, however, that all the preparatory work would be completed in time to make sure the listing is done before the end of the year. “It is my wish to conclude this process at the end of the year, but I don’t want to regret later on. I don’t want to see our stock market collapse,” he said.

The DSE Chief Executive Officer (CEO), Mr Moremi Marwa, said he understood that consultations with the stakeholders were still going on and he expected the regulations would be signed soon. “To my understanding, the Minister is still doing consultations with various stakeholders.

In my recent discussions with the Ministry, I was told that the regulations might be signed by the Minister by April this year,” he said in an e-mail to this newspaper.

He, however, said it has been revealed that the telecoms preferred voluntary to mandatory listing which should be dictated by operational and strategic business decision.

“They (mobile phone operators) 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.

And I am told that some of the government officials are bending towards this direction,” he said. He said there were countries such as Iraq and Bahrain whose telecoms have listed at their stock exchange markets after enacting a legislation with similar provisions to that of Tanzania.

The DSE boss dismissed as misguided views that the Dar es Salaam bourse could not accommodate all the firms saying the market had potential to absorb all the firms given its market capitalisation which has now reached about 24tri/-, and turnover average of 400bn/-.

“People have been misguided into believing that our market is somehow too small for telecoms to mandatorily list, let me make this clear: for whoever pays attention to the local exchange, they may have noted that our market has recently improved significantly depth (market size) is now 24tri/-, market liquidity (turnover) averages 400bn/- and valuations of PE Ratio of 17 times.

“Just two years ago backward our market depth was 14tri/-, annual average turnover of 50bn/- and PE Ratios were less than 10 times. 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,” he said.

He said if the telecoms were to list, the potential liquidity to absorb the recommended 35 per cent, which is equivalent to a combine 850 million US dollars for the four major telecoms, as per the Barclays Report, would not pose a significant challenge to the bourse.

Telecoms have been Tanzania’s fastest expanding industry. Operators include Vodacom Tanzania, a unit of South Africa’s Vodacom, India’s Bharti Airtel, Tigo, a unit of Sweden’s Millicom Cellular International, and United Arab Emirates telecoms operator Etisalat.
Source: Daily News, reported by Henry Lyimo and Abduel Elinaza, from Dar es Salaam, Tanzania
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