Tuesday 26 September 2017

Vodacom Tanzania May Seek IPO Extension, Foreign Involvement

Vodacom Tanzania May Seek IPO Extension, Foreign Involvement
(Bloomberg 04/18/17)
Vodacom Tanzania May Seek IPO Extension, Foreign Involvement

Vodacom Group’s Tanzanian unit is considering asking market regulators to extend the deadline of its initial public offering and allow foreign participation because it’s under-subscribed, the lead adviser said.

A request is being considered because uptake of the shares is “still below target,” Fortius Rutabingwa, head of market research at Orbit Securities Ltd., said by phone Thursday from the commercial capital, Dar es Salaam. Lawmakers on Wednesday asked the regulator to extend the offer, which closes April 19, to allow people more time to buy the shares, MP and opposition leader Zitto Kabwe said by text message.

One of the reasons an extension may be requested “is because the IPO is under-subscribed,” Rutabingwa said. “The other reason to extend is to allow East Africans to take part.”

Vodacom is offering 476 billion shillings ($214 million) worth of shares in the mobile operator, the biggest IPO in Tanzania so far. Once completed, the sale will boost the Dar es Salaam Stock Exchange’s market capitalization by at least 2.4 percent to about 20.7 trillion shillings, according to data on the bourse’s website.

“A failed Vodacom IPO would raise serious questions regarding the viability of the Tanzanian capital markets as a source of equity capital and dent the government’s hope of broad-based economic empowerment of its people through ownership of its leading enterprises,” said Bertram Eyakuze, an independent financial analyst in Dar es Salaam. “More generally, the country’s image as an investment destination would suffer a significant setback.”

Foreign Participation

Core Securities Ltd., a Dar es Salaam-based brokerage, so far only has commitments to buy 100 billion shillings of shares, out of the 200 billion shillings it targeted, Core Chief Executive Officer George Fumbuka said by phone.

Foreigners are barred from participating in the share sale because of domestic ownership rules in Tanzania. While the Capital Markets and Securities Authority is optimistic that domestic investors will absorb all of the shares, it may consider opening up the offer to foreigners if it’s under-subscribed, spokesman Charles Shirima said last month.

“We are still optimistic that the target will be met by the deadline,” Shirima said by phone on Thursday. “Because we haven’t yet received the report from the lead adviser, we can’t say what is the position of the IPO.”

Vodacom is listing because Tanzania’s government requires all telecommunications companies in the country to sell at least a 25 percent stake on the Dar es Salaam exchange to boost domestic ownership.

The company expects demand for the shares to increase in the remaining days of the offer, Rosalynn Mworia, head of corporate affairs at Vodacom Tanzania, said by mobile-phone text message.

“We have witnessed increased interest and applications over the past few days which we hope will see to a successful close of Vodacom’s IPO,” she said.

Omar Mohammed

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