Vodacom Tanzania extends IPO to give local investors more time
Some 25 per cent of the company’s shares should be taken up by locals
Vodacom Tanzania Plc, which recently offered 25 per cent of its shares in an initial public offering, has failed to meet the set threshold, raising questions about the ability of Tanzanians to take up the shares of the country’s biggest telco.
The IPO, offered in March 9 and closing on April 19, has not yet raised the Tsh560 billion ($248.5 million) exclusively allocated to Tanzanians.
On Wednesday, Vodacom Tanzania, a subsidiary of Vodafone Group, extended the offering for three weeks giving additional time for the shares to be bought.
“This extension will help ensure full participation by retail and institutional investors, who have requested more time,” said Rosalynn Mworia, the Vodacom Tanzania corporate affairs and public relations director. “We thank all Tanzanian investors who have participated in the initial offer to date, and look forward to welcoming new shareholders.”
The failure by the telco to raise the targeted capital is similar to the 2011 Precision Air IPO.
That year, the privately owned airline issued an IPO seeking to raise Tsh28 billion ($16.5 million) to expand its routes and purchase new aircraft, but only managed to raise Tsh11.84 billion ($5.25 million).
In the case of the Vodacom offering, market analysts cite overpricing of the company’s net asset value. The Tsh476 billion ($212.8 million) offer is about 25 per cent of the company’s worth of Tsh1.9 trillion ($844.9 million).
According to Laurean Malauri, chief executive of Orbit Securities, the Precision Air IPO was undersubscribed largely because investors were not comparing the company with another airline, but rather with Tanzania Breweries Ltd (TBL), which appeared to be more attractive at the time.
TBL, a Sabmiller subsidiary, is listed on the Dar es Salaam Stock Exchange. It is among the bourse’s top movers, with a share price of Tsh12,000 ($5.3) as of last week.
Experts say that if the Vodacom IPO fails, the company may have to rethink the 25 per cent local ownership from which other East Africans have been locked out.
“Equity markets need time to develop, and 25 per cent is rather ambitious, as there is limited equity in local hands waiting to be invested. That’s why you see the shareholding structure of some large organisations favouring wealthy and politically connected individuals who have access to capital,” said George Kalebaila, director for telecoms and Internet of Things in Africa at IDC.
Analysts advise the regulators to consider opening up the offer to foreigners if it will still be undersubscribed after the threeweek extension.
But the IPO’S lead advisor, Orbit Security, said they will maintain the requirement of the law and there will be no foreign involvement.
Juventus Simon, Orbit Security general manager, told The Eastafrican that they are confident the threshold will be met in three weeks.
He declined to disclose how much the offer has netted so far, saying that subscriptions are going on and the compilation of the raised funds will take place after closure.
The IPO blocked foreigners from buying the 25 per cent stock until it is listed on the DSE in early June.
“This is a legal matter. It is stipulated in the domestic ownership laws,” said Capital Markets and Securities Authority spokesperson Charles Shirima.
The South Africa-based parent company, Vodafone South Africa, is only listed on the Johannesburg Stock Exchange.
Vodacom Tanzania was launched in 2000, and the country is the group’s second biggest market with 13.4 million active subscribers as at December 31, 2016.
A Vodacom retail outlet.