Why are telecommunications companies (telcos) reluctant to float their shares in bourses where the brands operate across Africa? Why do the telcos always requiring subtle threats in the form of compelling regulation, withdrawal of operating licences, sanctions, public angst to muster the needed persuasions in order to consider the positive derivatives of driving the local markets with their participation in the local capital markets? In this in-depth industry analysis, Olubayo Abiodun, Clifford Agugoesi and Chimezie Ndubisi provides insight into the puzzle
Telcos Wary Of Listing In Local Bourses
MANY economies on the African continent are bogged down with recession. Notwithstanding the economic downturn plaguing several nations on the continent, the telecommunications sector remains one of the fastest growing industries on the continent, with many companies looking to either enter or expand on African soil. Many of the companies are reporting good numbers in terms of turnover and subscriber numbers. Yet it would seem that telcos are averse to sharing their prosperity with the impecunious Africans from whom they reap so much profit.
Why are most telcos operating in Africa wary of listing their shares on the local bourses of countries where they operate? The story is similar in most Africa countries where the leading lights in the communications sector of the economy often have foreign pedigree. The list include the MTN Group (South Africa), Bharti-Airtel (India), Vodafone (United Kingdom), Orascom Telecom, Mobinil and Safaricom partly owned by UK’s Vodafone all of which present curious ironies because these brands all have their shares floated on their home bourses.
While in orther jurisdictions telcos dread getting listed in local bourses, but for the telcos in Egypt, going to the market was as smooth as icing in the mouth. In the case of Vodafone Egypt, which was 67 per cent-owned subsidiary of Vodafone Group (UK), the mobile operator did not require any element of compulsion to float its shares on the Egypt Stock Exchange with listings in Cairo and Alexandria bourses. The company took the bold initiative in 2003 to apply to list its shares on the Egypt stock exchange. As at the time Vodafone was putting in its application, its rival operator MobiNil, which was the incumbent, was already listed. By the time it got the approval, Vodafone Egypt had its shares listed on the Cairo and Alexandria Stock Exchange (CASE). Vodafone initially applied to sell 16 per cent of its 67 per cent stake in Vodafone Egypt to Telecom Egypt, a fixed operator.
While CASE enjoyed inimitable patronage from the telcos including Orascom Telecom, Africa’s second-biggest bourse after the Johannesburg Stock Exchange (JSE), the Nigerian Stock Exchange (NSE) is still struggling to bring on board blue chip telcos to float their shares on the NSE. Most of the telcos have blamed structural issues for the delay in getting their securities listed. CEO of NSE had once suggested that getting the telcos to list on the NSE would better mirror the make-up of the Nigerian economy. Much as the countries have tried to convince these private telcos to float their shares, the efforts have been met with cold shoulders. A few countries have contemplated using legislative inducement to compel the initial public offer (IPO) by these reluctant telcos.
Local Listing By Force Of Legislation
COUNTRIES that have contemplated using the instrument of the Parliament to ensure mandatory listing in the local bourses include Ghana, Tanzania, Nigeria and Gambia. In Q3 2015, Speaker of the Nigerian House of Representatives Yakubu Dogara, added his voice to opinion of stakeholders across different climes on the continent on the need for foreign firms to share their prosperity with citizens of the country of operations. Addressing the Nigerian concern, Dogara said the listing requirement would apply to companies in the Oil & Gas and telecommunication sectors and is necessary “in order to deepen the market and make capital available for investors and create employment.” It is not the first time that the Nigerian government has sought to pass a mandatory listing measure.
The slant of the narrative is attracting a different curve today as a result of the impact of regulatory mandate and in some cases direct political leadership and parliamentary intervention. Tanzania’s President John Magufuli is a direct example of such political leadership with the vested interest in the intervention to get the foreign telcos to float their shares in the country’s stock exchange. Legislation compelling all telcos to float shares on the Tanzania local bourse was introduced in 2010. But it remained inactive until 2016 when President Magufuli gave a presidential fiat for its implementation. The country’s eight operators are required by law to have 25 per cent local ownership by December 31, 2016. The Finance Act states that companies incorporated in Tanzania to provide telecommunication services are required to offload at least 25 per cent of their shares through an initial public offering (IPO) and subsequently list on the DSE as CMSA regulations require.
Before the June 2016 amendments, the Act only required mobile phone companies to float at the DSE an unspecified number of shares that was to be determined by the minister responsible for telecommunications. Section 22 of the Act (together with the Finance Act amendments) says failure to comply with mandatory listing at the DSE is a breach that can lead to the cancellation or suspension of a company’s licence if the firm will not have remedied any such breach “within 30 days of receiving notification from the Authority”.
The vulnerable firms to this legislation include Vodafone subsidiary Vodacom Tanzania (a unit of South Africa’s Vodacom), part of Sweden’s Millicom subsidiary Tigo Tanzania, Zantel, a unit of Etisalat and a local unit of India’s Bharti Airtel. According to the Act of the Parliament, telecommunications companies which were licensed before July 1 2016 must abide by the law to list their 25 per cent of shares at DSE before the end of 2016. Under the 2016 Electronic and Postal Communications Act (Epca), December 31 was the deadline for the firms’ listing. Companies licensed after July 1 2016 have two years to prepare for listing. An amendment to a new finance Bill requires the eight operators to float 25 per cent of their shares on the bourse.
Tanzania’s Finance and Planning Minister Philip Mpango while defending the stand of government told the National Assembly that the companies’ listing on the bourse would “help the government trace the exact revenue generated by the firms as well as enable Tanzanians to hold shares”. Mpango stressed that contrary to insinuations in some quarters that the Bill was a policy reversal, he explained that the Bill merely enforced the Epca of 2010, which stipulated that foreign telecoms companies to list locally.
The government passed two separate telecoms and mining laws in 2010 requiring the companies to list on the stock exchange as it sought to boost the nascent bourse’s value and improve corporate governance and transparency. The law required existing telecoms companies to list on its stock exchange by 2013, but officials said implementation of the legislation was delayed by legal and regulatory procedures.
President Magufuli, elected to office 2015, has said the move to enforce such listing in the local bourse will bring more transparency and offer the public a share in the industry’s profits. During the 2016/17 budget debate, the Minister for Finance and Planning, Philip Mpango, said the law would help the government to trace the revenues of the telecom companies and enable Tanzanians to own shares in the sector. Tanzania is the second largest telecoms market in East Africa behind Kenya, with a penetration of 79 per cent of the total population, with subscribers estimated at 40 million in 2015.
It was not the first time that the executive arm of the government had shown interest in the local listing of the telcos. In April 2015, the country’s Deputy Minister of Communication, Science and Technology, January Mkamba had reiterated that all telecom companies operating in Tanzania will be listed on the local stock exchange by the end of 2015, shortly after the telcos flouted the initial deadline to do so.
According to him, the mandatory listing on the Dar es Salaam Stock Exchange would enable Tanzanians to take a stake in and benefit from the lucrative industry that is the fastest expanding sector in East Africa’s second biggest economy.
Pundits were, however, worried at the clause in the telecoms law which allows only Tanzanians to purchase the equities of the telecoms companies to be listed on the local bourse. Although foreigners are allowed to buy listed shares, the telecoms law restricts buyers in the new listings to Tanzanians. Their anxiety is heightened by the rush to have all the telcos listed about the same time which could create the challenge of under subscriptions because of the prevailing economic recession in the country. Some other analysts also put it succinctly, Ahmed Salim at global advisory Teneo Intelligence said, “There’s a lack of realism.” According to him, the Dar es Salaam Stock Exchange has a market capitalisation of $9.3 billion, while he estimated that the total market capitalisation for all the telecoms firms amounts to $2.5 billion. According to the analyst, listing stakes in the firms by the end of 2016 could overwhelm the market, where officials say annual turnover is $1 billion, leaving offerings undersubscribed.
But the chief executive of the DSE, Moremi Marwa, thinks otherwise stressing that the planned listing of telecoms companies would be a big boost to the exchange. “The implementation will result in more listings on the exchange, which will then increase the market depth and liquidity into our local exchange and hence generally help to grow our capital market industry,” Marwa said.
“This will also fundamentally allow for more transparency, good corporate governance and more accountability by telecoms.” In September 2014, Tanzania set aside a rule that barred foreign investors from buying more than 60 per cent of shares in a listed company on its bourse.
Marwa, said three companies had asked for listing guidance by the first week of January 2017. The three firms were Vodacom Tanzania, MIC Tanzania Limited (Tigo) and Airtel Tanzania. These firms have so far submitted their prospectuses to the Capital Markets and Securities Authority (CMSA) as an initial step towards listing at the DSE, according to TCRA director-general James Kilaba. Asked to clarify on the implication of the failure to meet the December 31 deadline, Kilaba said that would depend on CMSA’s verdict.
“Right now we cannot take any action because the law on compulsory listing of shares at the stock market requires us to submit a list of companies to CMSA for assessment and then wait for their report,” he said.
“We can take action only after an assessment by CMSA, which has the professional competence to do that work. Action that can be taken against companies that will have deemed to have acted in a defiant manner includes de-registration and suspension”
Kilaba said the list forwarded to CMSA includes not only mobile phone companies, but also Internet service providers and other firms providing communication services. This is the stipulation of the Finance Act, 2016 which amended Section 26 of the Electronic and Postal Communications Act, 2010. The Finance Act states that companies incorporated in Tanzania to provide telecommunication services are required to offload at least 25 per cent of their shares through an initial public offering (IPO) and subsequently list on the DSE as CMSA regulations require.
According to a local press, CMSA public relations manager Charles Shirima confirmed that only three mobile phone operators had filed their prospectus with the authority by January 5, 2017. “Our job is to receive prospectus from companies, and we normally spend 21 days reviewing the documents before we can approve or reject them,” he said. There are seven landline and mobile phone operators in the country so far — Airtel, Smart, Halotel, Tigo, Tanzania Telecommunications Company Limited (TTCL), Vodacom and Zantel.
Capital Market Regulators Can Only Bark
TWO years after the Managing Director of Ghana Stock Exchange (GSE), Kofi Yamoah, announced plans to create a local content regulation that would enforce mandatory listing of foreign firms on the GSE, the desire is still a myth rather than a reality. Yamoah had told journalists in Accra that foreign firms operating in Ghana could be forced to list on the GSE by 2015 when the exchange would have secured approval for a local content legislation for the capital market.
The target of the ambitious legislation at the time were big and multinational firms including MTN Ghana, Vodafone Ghana, Newmont Gold Ghana, Gold Fields Ghana, Equity Assurance, Zenith Bank Ghana and Guaranty Trust Bank Ghana, which are listed in their respective home countries capital markets.
It is still uncertain what has become of the planned legislation, however, what is certain is that two years down the line, none of the targeted multinational companies listed in their various local bourses have been listed in the GSE. Despite the cajole and various stakeholders meetings, conferences and seminars to get the multinational companies to float their shares on the Ghana bourse, Airtel Ghana has further widened the gulf by insisting that it has no such plans in the offing.
Close to the subtle threat by the GSE were the constant public statements issued by the Nigerian Stock Exchange assuring the public that the telcos operating in Nigeria would be compelled to float their shares on the local bourse. While telcos in Ghana are still adamant, there are indications that MTN Nigeria may go to the market in the financial year 2017. Nigeria is among several African governments encouraging telcos to list on local bourses.
Tanzania had to issue legislation by passing a bill through the parliament compelling all foreign firms operating in the country to list on its local bourse. Getting MTN Nigeria to agree to float its share was not a piece of cake for the NSE. At various times top government officials including legislators, Ministers and NSE top guns have spoken on the desirability of having foreign firms, particularly telcos listed on the NSE. But MTN only agreed to float its shares partly as a condition to settle a record $1.7billion fine for failing to disconnect 5.1m unregistered subscribers.
Listing Can Increase Liquidity, Corporate Governance
DESPITE Africa’s bleak economic growth, weakening currency and the trend against investing in emerging markets, tracked performances of multinationals have shown that they have the power to move the needle upwards in the stock exchanges. Telecommunications companies have proven to be the needed elixir to stir up Africa’s economic rebound given the positive trajectories of most of the Mobile Network Operators on the continent.
There are more than 195 MNOs operating in 54 countries in Africa with MTN, Airtel, Vodacom, Orange, Ooredoo, Zain, Moov, Glo Mobile, Etisalat, Nationlink, Econet, YooMee and Africell having multiple operational bases in the different countries across the African continent. The MNOs mostly deployed GSM technology, while a few operate CDMA and some others also combined UMTS. The ownerships of the MNOs are split between government investments, institutional investors and private equity. Most of the MNOs do not have their shares quoted on the stock market of local bourses in the countries where they currently operate. The exceptions include MTN and Vodacom which are quoted on the Johannesburg Stock Exchange (JSE), Telkom SA SOC has a listing on the JSE under ticker TKG. The company listed in 2003. The South African government owns 39.76 per cent of Telkom. Curiously, Cell C which commenced operations in 2001 only muted the idea of listing in 2015 with still nothing to show for it. Bharti Airtel is also listed on the Indian Stock Exchange.
Some of the MNOs operating on the basis of countries: ALGERIA – Djezzy, Mobilis, and Ooredoo, ANGOLA – Unitel, and Movicel, BENIN – MTN, Moov, Glo, and Libercom, BOTSWANA – Mascom, Orange, and BeMobile, BURKINA FASO – Orange, Telmob (Onatel), and Telecel Faso, BURUNDI – Econet Leo, Tempo (formerly Safaris Africell), Onamob, and Smart Mobile (formerly Lacell), CAPE VERDE – CV Movel, and T – Mais, CAMEROON – MTN, Orange, Nexttel, Camtel, and YooMee, CENTRAL AFRICAN REPUBLIC – Telecel Centrafrique, Orange, Nationlink, and Moov, CHAD – Tigo, and Airtel, COMOROS – Comores Telecom (Comtel), and Comoro Gulf Holding, CONGO – MTN, Airtel and Azur, COTE D’IVOIRE – MTN, Orange, Moov, and YooMee, DEMOCRATIC REPUBLIC OF CONGO – Vodacom, Orange, Tigo/Orange, Africell, Airtel, Supercell, SemaTel, U-Com, and Smile.
Others include: DJIBOUTI – Evatis, EGYPT – Vodafone, Orange, Etisalat , and Telecom Egypt, EQUATORIAL GUINEA – Orange, Muni, and Gecomsa, ERITREA – Eritel, ETHIOPIA – Ethiotelecom, GABON – Airtel, Libertis, Moov, and Azur, GAMBIA – Africell, Comium, Gamcel, and Qcell, GHANA – MTN, Vodafone, Tigo, Airtel, Glo, and Expresso Telecom, GUINEA – Orange, MTN (formerly Areeba), Cellcom Guinee, Intercel, and Sotelgui, GUINEA–BISSAU – MTN, Orange, and Guinetel, KENYA – Safaricom, Airtel, and Telkom Kenya (formerly Orange), LESOTHO – Vodacom, and Econet Ezi-Cel, LIBERIA – Lonestar Cell, Cellcom/Orange, Novafone (formerly Comium), and Libtelco, LIBYA – Al Madar, and Free Libyana, MADAGASCAR – Airtel, Telma Mobile, Orange, Blueline, and bip Madagascar, MALAWI – Airtel, TNM, G-Mobile, Lacell, and G-Expresso.
The MNOs across Africa also include: MALI – Orange, Sotelma-Malitel, and Planor, MAURITANIA – Mauritel, Chinguitel, and Mattel, MAURITIUS – Orange, Emtel, and MTML, MOROCCO – IAM, Orange, and Inwi, MOZAMBIQUE – mcel, Vodacom, and Movitel, NAMIBIA – MTC, and TN Mobile, NIGER – Airtel, Sonitel, Orange, and Moov, NIGERIA – MTN, Airtel, Glo Mobile, Etisalat, ntel, Smile, Visafone and Multi-Links Telecommunications Limited, RWANDA – MTN, Tigo, and Airtel, SAO TOME AND PRINCIPE – CST, SENEGAL – Orange, Tigo, and Expresso, SEYCHELLES – Airtel, and Cable & Wireless, SIERRA LEONE – Africell, Orange, and Sierratel, SOMALIA – Hormund, Telecom Somalia, Telesom Mobile, Nationlink, Somtel, Golis Telecom Somalia, Somafone, and Netco, SOUTH AFRICA – Vodacom, MTN, Cell C, and Telkom.
Also providing services in some other countries: SOUTH SUDAN – MTN, Zain, Vivacell, and Gemtel, SUDAN – Zain, MTN, Sudani, and Canar, SWAZILAND – MTN, TANZANIA – Vodacom, Airtel, Tigo, Zantel, TTCL Mobile, Benson Informatics, MyCell, Excellentcom, Egotel (Lacell), Smart, Smile Communications and Halotel, TOGO – Togocel, and Moov, TUNISIA – Ooredoo, Tunisee Telecom, and Orange, UGANDA – MTN, Airtel, Africell, UT Mobile, Essar and Smart Telecom, ZAMBIA – MTN, Airtel and Zamtel, and ZIMBABWE – Econet, Telecel and Net*One.
Listing That Went Awry
STARCOMMS, an erstwhile CDMA operator was the first mobile telco to be listed on the Nigerian Stock Exchange. The boon of the initial celebration did not last long before the gloomy side of the market overwhelmed the brand. Not only that it could not sustain the market expectations because of the pressure in the mobile market triggered by the domineering activities of the GSM operators, it would seem that the stock exchange could not provide the needed shield for the governance issues and technology differential between the CDMA and GSM of which the GSM has the upper hand in the market.
By August 2012, a few years after its listing, the Nigerian Stock Exchange (NSE) announced the suspension of Starcomms shares because of a potential capital reconstructing exercise by Starcomms following its merger with two Code Division Multiple Access (CDMA) operators, Multi-Links Telecommunications Limited and MTS. The core investor, CAPCOM; the special purpose vehicle for the marriage of the firms had planned to inject $200 million into the new company. The expectation was that this new venture will revive operations and renew the vigour of CDMA operators, a market segment that had come under significant competition from GSM operators. Since the emergence of GSM in the market in 2001, CDMA operations which had hitherto dominated the market had been on an annual decline with the massive loss of market share by the dominant players: Multilinks, Starcomms, Visafone and ZoomMobile. The monthly figures from the industry regulator; the Nigerian Communications Commission (NCC), was always showing a southward drive in the subscribers numbers recorded by the CDMA operators in direct opposite to the records of the GSM telcos.
But in June 2014, Starcomms suffered its worst blow when the stock was delisted by the NSE. The company was among 20 companies that the NSE delisted for non-compliance with listing requirements. While 15 of the companies were delisted for failure to file their quarterly and annual financial statements, five others were delisted for failure to regularise their listing status after being given time to do so. Starcomms Plc was among those delisted for failure to file their financial statements. Also delisted were Daar Communications Plc; and Mtech Plc; among others.
In 2008 the shares of Starcomms were listed on the Nigerian Stock Exchange following the private placement which raised over NGN64 billion (USD550 million) for the company. The move made Starcomms the first listed Nigerian telco. The private placement provided the erstwhile CDMA operator with a substantial amount of capital for future growth, and by that move the private equity investors Actis and Emerging Capital Partners had both sold their respective stakes in the company. The journey to the capital market started for Starcomms in January 2005, when ECP Africa Fund I committed to investing in Starcomms Nigeria Limited.
Starcomms was at the time a private telecommunications operator that owned and operated a CDMA wireless network capable of offering mobile, fixed and data services. Starcomms actually launched its network in 2002 and by 2005 had grown to become the largest CDMA operator in Nigeria and a leading provider of 3G wireless broadband. Following the Fund’s investment, Starcomms grew rapidly and, at the time of ECP’s exit in July 2008, the Company had grown its subscriber base to 1.5 million.
Why Starcomms Failed In The Stock Market
BY share providence, Starcomms Plc. was the first telecoms firm to be listed on the Nigerian Stock Exchange (NSE). On Monday July 14 2008, Starcomms listed 6,878,478,096 Ordinary Shares of 50 Kobo each at N14.33 Kobo per share. But as at March 3 2009, the shares of the telecoms company closed at N2.46 Kobo compared to its first trading day closing figure of N14.33 Kobo indicating a decline of 482.52 per cent in the review period. This was not a beautiful picture to behold for the shareholders and the other stakeholders. Africa Telecom and IT gleaned from knowledgeable insiders that its share prices nose-dived at the period because of the company’s failed strategy. The ‘timing’ of the listing which coincided with the period of capital market meltdown was also flagged as a contributory factor.
Proshare NI reported that the cause of the dwindling fortune of the share price of Nigeria’s fourth largest telecoms company, at the time, was due to its strategy failure. It was reported that the period of Starcomms’ listing in the stock market coincided with the entrance of another CDMA operator: Visafone Communications Limited, into the Market. Visafone began operation with a price war by slashing prices/subsidising its phones and services. To confront this elephant in the house in order to defend and grow its market, Starcomms too slashed prices of its phones due to the stiff competition from Visafone.
Proshare NI further reported that the strategy did not work and the company’s profit may not have been affected in the First Quarter (Q1) of year 2009, but the story was not pleasant in the subsequent years. And because the company was not able to make profits, Starcomms share prices began to dwindle.
Okpara Mike Ezeh, a Capital Market Operator and the Managing Director (MD) of Crane Securities Limited, (Member of the Nigerian Stock Exchange) also gave another insight to the reason for the crash of Starcomms from the market. He faulted the company’s pronouncement of paying dividend to investors after two years of post-listing. According to him, this was a major setback to Starcomms because it also influenced their falling share price.
“Starcomms pronouncement that they would not pay dividend to investors until after two years is a major setback and that is the reason their share price fall because that pronouncement eroded the confidence of investors.
“I advise Starcomms to issue bonus to its shareholders even if they are not going to pay dividends, it is better for Starcomms to issue bonus, and investors of the company would be happy; instead of not giving anything at all” he said.
Maher Qubain, the erstwhile Chief Executive Officer (CEO) of the telecoms company, had confirmed to Proshare NI at the Stock Exchange on the day of listing of the company that Starcomms would not pay dividend to its investors until after two years; following a sustainable growth. Starcomms listed on the Information Communication & Telecommunications (ICT) sector. The company listed 6.88 billion units of shares at N14.33 and later went down to N2.00. Starcomms could not sustain the rally to achieve the highest price as it started coming down a day after its listing.
MTN Nigeria Listing Could Be A Booster
BY Q3 2016, the international news media (the traditional and social media) was awash with the news of the plan by MTN Nigeria to float its shares in the local bourse ; the Nigerian Stock Exchange (NSE) before the end of the financial year 2017. It was a welcoming development for the pundits and the citizens alike. But the decision did not come on a platter of gold. The South Africa owned mobile operator had to wait until an unprecedented $5.2b sanction to agree to the listing of its equity on the local capital market in Nigeria. MTN Nigeria had been fined $5.2 billion for SIM registration infractions by the Nigerian Communications Commission (NCC). The penalty on the 5.1 million unregistered SIM cards was initially reduced by 25 per cent to $3.9b. But the high wired interventions by the government of both countries eventually reduced the fine by 70 per cent to $1.7b. And part of the conditions precedent for the resolution of the impasse between MTN Group and NCC was the mandatory listing of MTN Nigeria equities on the local bourse.
Reacting to this plan by MTNN to float its shares via IPO, the NSE CEO Oscar Onyema said the “pressure on MTN has never been higher to list,” adding the company was working with officials to confirm the details, according to a Reuter report early January 2017. This plan for an initial public offer (IPO) of shares on the Nigerian Stock Exchange in 2017, according to an official who spoke with Africa Telecom & IT, could raise up to $1bn. Nigeria contributes a third of sales and profit for the Africa’s biggest phone company, which is listed in Johannesburg with market capitalization of ZAR212.8bn ($15.3bn) in early October. Industry sources said that getting the biggest of the telcos to list in Africa’s second biggest bourse could be a bait to lure other telcos to fasttrack listing in the local bourses of countries of operations.
Just as the dust was settling on the row over the SIM cards infraction, the company was accused by a petition in the federal Parliament of illegally transferring almost $14 billion out of Nigeria over the course of ten years. This allegation was strongly denied by the operator. Pundits who spoke with Africa Telecom & IT are convinced that public listing of MTNN would increase its transparency and adherence to corporate governance codes.
The best Nigerians have been able to achieve with shared prosperity in the MTN Nigeria was the private placement which was announced in 2007. MTN Group announced that it had reduced its stake in MTN Nigeria to 76.08 per cent. Nigerian individuals and key institutions have acquired a 9.45 per cent stake in MTN Nigeria from MTN and other shareholders in the Nigerian business, MTN said in a statement.
MTN said it had sold a 5.96 per cent stake for $594.50 million as part of private placement. The company said that the transaction was aimed at broadening MTN Nigeria ownership among Nigerian citizens and institutions. But the MTN Group and its private placement partners-IBTC Assets Management, Lotus Capital, IHS Holdings and INT Towers Limited ran into troubled waters when it was reportedly alleged by a lawyer; Dr. Charles Mekweye that the deal was a deceit. He had sought a legal redress against MTN Communications Nigeria Limited and its partners in the alleged “dubious private placement offer.”
Dr. Mekweye, in a report by National Enquirer asked for a refund of $450,000 (four hundred and fifty thousand dollars for the “current total value” of the 5,000 units of the MTN shares and another N100m (hundred million Naira) as general damages from MTN. Mekweye also asked for N100m as damages against Hajara Adeola’s Lotus Capital and Atedo Peterside’s Stanbic IBTC Assets Management among others.
Mekweye claimed that MTN in the private placement reportedly tagged the offer: MTN Nigeria Linked Unit. By this, the shareholders were meant to believe that, a process had been put in place for “Special Purpose Vehicle” which is tantamount to upgrading MTN shares on the Nigeria Stock Exchange and will thereby automatically transfer the shares into MTN proper after what they called an exit period of 3 years.
Frustrated that the dream of becoming an investor in MTN was only a pipe dream, after investing about $127, 000 (N27m) on 5,000 units of the supposed MTN Shares, the aggrieved investor sought legal redress. The investor was particularly irked that all promises such as; the shares will be transferred to MTN in a globally recognized stock exchange and so on were all a ruse.
Ever since the matter of the contentious private placement disappeared from public glare, the company had been swinging between promises and outright denials to float an Initial Public Offer for the generality of the Nigerian citizens to partake of its good tidings in the country. The issue of listing was eventually settled in 2016 when it was included in the terms of agreement for the resolution of the regulatory infraction on the unregistered 5.1m SIM lines.
This resentment for local participation is not peculiar to the Nigerian market and it is not customised attitude of the MTN brand. Again, the experience in Zambia bore similarity to what happened to MTN Nigeria. In both countries, MTN is the largest operators. It was not until MTN Zambia had palpable apprehension that the country’s regulator, the Zambia Information and Communication Technology Authority (ZICTA) might impose sanctions on the company for failing to comply with the regulation, that the brand took positive steps to ensure listing on the Lusaka Stock Exchange (LuSE). MTN is, to date, the only foreign owned mobile phone operator in the country yet to comply. ZICTA regulation compels foreign-owned telecom companies to have 10 per cent of shares held by Zambians through the stock exchange.
The ding-dong affair stated in 2009 when MTN said it was set to finalise the issuance of the shares through a private placement arrangement in the first quarter of 2010. For unexplained reasons, MTN Zambia reneged on its own plan. And by 2011, ZICTA issued MTN with an ultimatum to offer the 10 per cent shares to the public by 2014. ZICTA’s impeding sanction would now seem to have prompted MTN Zambia to consider complying with the regulatory mandate which seeks to ensure the empowerment of Zambians. But the process of listing is subject to final regulatory approvals by all the regulators in country including LuSE, Securities and Exchange Commission and ZICTA itself.
The story was no different in Ghana where MTN repeatedly opposed local listing until it became a condition for the award of the 4G license. In early Q4 2016, MTN announced plans to sell about 35 per cent of its shares on the Ghana Stock Exchange. Ghana’s Securities and Exchange Commission Director General Adu Anane Antwi confirmed they had started the listing process and were working on the prospectus but no timeline had been given. In 2015 MTN received its 15-year 4G licence on condition that it lists. With an initial commitment of $67.5m to procure the licence, MTN Ghana hopes to raise up to $500m for service roll out.
Airtel Sings Discordant Tunes On Listing
AFTER its initial inertia on the prospects of listing on the floor of the NSE, Airtel Nigeria, a subsidiary of Bharti Airtel of India has been fired up to consider a listing on the NSE less than two months after MTN took the bold initiative in Nigeria. Its Chief Executive, Segun Ogunsanya, on September 2, 2016 said Airtel Nigeria, the second largest telecoms firm by revenue (with a customer base of 30m), is mulling a listing on the NSE. Ogunsanya did not give specific details on the targeted year for the listing or the advisers it would be consulting. “Airtel is not shying away from a listing, we are certainly considering it, and we are in talks with the NSE to this regard”. He spoke at the NSE Bloomberg CEOs Roundtable. It would be recalled that in July, MTN Group commenced the process of listing its biggest subsidiary, MTN Nigeria, on the NSE.
While Airtel Nigeria is pushing something to look forward to, Airtel Ghana is driving in the opposite direction. Three months after her counterpart in Nigeria mulled the idea of listing on the NSE, Managing Director for Airtel Ghana, Lucy Quist told Citi Business News, a local media that it was not prepared for listing on Ghana Stock Exchange (GSE). Justifying this position, Quist said “We are not listing on the Ghana Stock Exchange because Airtel is a listed company on the Indian stock exchange and those shares are opened to anyone to purchase”.
While ruling out any plans to list in the medium to long term, on the GSE, she directed those desirous of having Airtel shares to purchase through the India Stock Exchange. “That’s probably something that we need to be more informative around it; there are no restrictions around who can buy shares on any stock exchange and I think it will be really good if people wanted to participate and buy those shares,” she stated. “Ghana has six telecom operators but none of them is currently listed on its local bourse. This is despite calls by the Securities and Exchange Commission and Ghana Stock Exchange for them to do so.
In the past, the erstwhile Ghana Stock Exchange Chairman Sam Mensah had advised the Ghanaian government to float its minority shares in Vodafone Ghana and Airtel Ghana. While making the call, he said at a meeting in Accra that these stakes should be “separately floated in the interest of the bourse and the market at large.” The government of Ghana used to have a 30 per cent share of Vodafone Ghana and 25 per cent of Airtel Ghana via the Ghana National Petroleum Corporation (GNPC).
In contrast to the rebuff of Africans by the Airtel entity in Ghana, Gambians have been allowed to share in the prosperity of the company by the listing on the Lusaka Stock Exchange (LuSE). Airtel Networks Zambia Plc, formerly Celtel Zambia Plc, is a Zambia-based company; owned by by Bharti Airtel Zambia Holdings BV.
While MTN Ghana is still entangled in the process of getting listed, pundits are still wondering when Vodafone Ghana will make good its promise to float its shares on the GSE more than two shares after it openly made the initial commitment. In November 2014, Vodafone Ghana CEO Haris Broumidis said Vodafone has plans to list on the Ghana Stock Exchange. “I think it is in the plan and ambition of the shareholders because you know we have two shareholders. We have Vodafone Group and the government of Ghana,” he told a local media Citi Business News, adding that the two main shareholders were studying trends on the GSE to make the move.
Even the threat by the GSE to get a local content legislation for the capital market that would compel foreign firms operating in Ghana to float their shares on the local bourse has not materialized. Among others, the targeted companies include the likes of MTN, Vodafone Ghana, Tigo and Airtel Ghana for the telecoms firms as well as Newmont Gold Ghana, Gold Fields Ghana, Equity Assurance, Zenith Bank Ghana and Guaranty Trust Bank Ghana, which are listed in their respective home countries stock markets, would all be listed on the Accra Bourse.
Kofi Yamoah, Managing Director, GSE, said that it was advocating a local content legislation for the capital market that would compel all multinational firms in Ghana to float their shares on the Accra Bourse to enable Ghanaians share in their fortunes. Yamoah said, “The stock market doesn’t see local contents in only empowered individuals in jobs but also want local contents to be seen as companies being made to offer part of their shares to their Ghanaian investing public.
Why Telcos Need To Boost Local Bourses
THE African Development Bank (AfDB) and the African Securities Exchanges’ Association (Asea) has a strategic plan to create regional bourses in a 5-year plan and Nigeria is one of the hubs in the deal. The other hubs are the Nairobi Stock Exchange in East Africa, the Casablanca Stock Exchange in Morocco and the Johannesburg Stock Exchange (JSE) in South Africa. The initiative, African Exchanges Linkage Project (AELP), seeks to abate intra-Africa trade by strengthening a seamless transaction platform that transcends geographic boundaries.
With the deepening economic recession and worsening monetary and fiscal policies in most nations on the continent, African bourses desperately need to work together to come out of the backwaters of recession. And to the bargain is the conscious decision of the multinationals to forge cooperation and collaboration to lift the people out of the doldrums of tight economic crisis. Telcos like other thriving brands must join hands with the local authorities to perfect the listing of their equities on the local stock exchange and the icing on the cake would be the cross listing where the opportunity is available.
The outlook of a stronger tie among African Stock exchanges was recently supported by Prime Minister of Rwanda Anastase Murekezi. He canvassed for regional integration among the bourses as the guest speaker at the 20th African Securities Exchanges Association (ASEA) annual conference. It was held in Kigali on 28-29 November 2016. The theme was “Road to 2030: Making the African capital markets relevant to the real economy”. The conference’s action agenda would see the regulated stock exchanges driving industrialization and economic transformation.
Among other issues discussed, panel discussions also highlighted the opportunities for African exchanges, provided they adapt to meet the needs and demands of local investors and issuers. They must also find the balance between local context and environment, and alignment with global best practices. The Chief Executive Officer of the Rwanda Stock Exchange, Celestin Rwabukumba, noted that innovation and technology would enable Africa’s capital markets to harness resources to fuel structural transformation: “Currently, less than 5 per cent of the African populace participate in the capital markets; this means that there is a huge opportunity to widen the base of African capital markets by incorporating new models based on technology and other creative innovations that target provision of direct linkages with the ordinary citizens in order to bring them in the loop of resource mobilization and utilization”.
In a recent review, The Economist magazine observed that most African stock exchanges are small and may not record significant improvement beyond that level. But pundits argue that some African exchanges are big enough to move forward, including Johannesburg Stock Exchange with nearly $1 trillion in market capitalization, Nigeria Stock Exchange and Kenya’s Nairobi Securities Exchange. Another worthy initiative is the West Africa’s integrated regional stock exchange, Bourse Regionale des Valeurs Mobilieres (BRVM), based in Abidjan, Côte d’Ivoire, and bringing together 8 national markets to create more investors and more listed stocks. With plans to open in 2018, the BRVM links eight West African countries, including gold exporters from Mali, Burkina Faso and Côte d’Ivoire, and fourth-largest uranium producer, Niger. This is a successful regionalization project that is worthy of mention in the current clamour to boost intra-African collaboration among the stock Exchanges. Drawing from the humble background of most African exchanges created in the 1990s to help with the sale or privatization of state-owned enterprises, today’s height is commendable. Various institutions involved in this effort have been turned from hemorrhaging entities into healthy companies, driving economies, creating jobs and making investors including local institutions richer.
A good example is the trend in the Uganda Securities Exchange where 7 out of 8 domestic listings are from privatizations. Botswana’s national telco was the BSE’s biggest IPO when it came to market successfully this year. In other Climes, African governments are using carrot and stick to get the telcos listed. In Nigeria, it was part of a negotiated fine settlement, Ghana bundled it into the award of 4G license, and Tanzania has reportedly ordered 8 telcos, including 3 offshoots of international companies, to float 28 per cent.
Also commendable are the healthy efforts by Africa’s regional economic communities. The Southern African Development Community (SADC) is supporting linkages between regulators, central bankers and the Committee of SADC Securities Exchanges. Strong advances include the SIRESS cross-border payments systems and cooperation and harmonization between exchanges and regulators, including on listing requirements. The West African Capital Markets Integration Council considerable progress has extended to mutual recognition of stockbrokers and regional structures, as highlighted in this blog, and cross-border share deals between national exchanges, in addition to its ground-breaking BRVM regional exchange for 8 countries. The African Development Bank (AfDB) and other multilaterals and finance institutions are supporting important projects.