The steady process of telecoms liberalisation in Tanzania has seen private investment in the sector soar in recent years, as mobile operators invest heavily in broadening next-generation services and mobilemoney platforms. In a bid to ensure that the domestic economy benefits from the increased activity in the sector, successive presidential administrations have sought to widen the ability of local investors to own stakes in the country’s mobile firms.
As a result, the previous government’s Electronic and Postal Communications Act No. 3 of 2010 stipulated that all Tanzania Communications Regulatory Authority (TCRA) licensees issue at least 25% of their shares on the Dar es Salaam Stock Exchange (DSE). The act’s three-year grace period came and went without any operators complying. The original clause in the 2010 legislation met with a mixed reaction from the government and operators alike. In a bid to improve tax data and revenue collection, as well as inject new liquidity into the DSE, President John Magufuli’s administration moved to expedite the initial public offerings (IPOs) of telecoms companies in June 2016. The National Assembly, through the 2016 Finance Bill, ordered all registered telecoms companies to issue the mandated 25% stake within six months of July 1 of that year.
Staggered Rollout
In January 2017 state-owned operator Tanzania Telecommunications Company Limited (TTCL) announced it had been given more time to comply with the IPO regulations, as it was restructuring following its 2016 renationalisation. In that same month the TCRA reported that three operators – Vodacom, Tigo and Airtel Tanzania – had submitted their prospectuses to the Capital Markets and Securities Authority (CMSA). These three firms are the largest by market share, collectively holding 85% of the mobile market, but there are three other mobile operators, excluding TTCL, that were also subject to the requirement. The TCRA announced that it planned to submit a list of companies that had failed to meet the deadline to the CMSA. The IPO requirements were also applied to smaller firms, including IT service companies not active in telecoms service provision.
First Offering
In March 2017 Vodacom became the first telecoms operator to launch an IPO in Tanzania, announcing it would offer 560m shares to the public at TSh850 ($0.39) each, for a total value of TSh476bn ($216.5m). The IPO was limited to Tanzanian subscribers only. In April 2017 the company announced it had been given a three-week extension to allow more investors to participate, and on June 6 Vodacom announced that its IPO was set to be the largest in the DSE’s 19-year history, with an estimated 40,000 Tanzanians subscribing for shares. The company reported that its delay in announcing the IPO results and listing on the DSE was due to the sheer volume of applications received, with the firm set to officially list on the DSE at the end of the month, following CMSA approval. It officially started trading on August 15, 2017. Orbit Securities, the lead adviser of the deal, reported that many subscriptions came from first-time investors.
Foreign Investment Shift
In June 2017 the government announced that it would allow foreign investors to purchase shares in telecoms operators listing on the DSE. Amendments were also made to exempt companies operating under the TCRA’s Converged Licence Framework as application services licensees from IPO requirements, as well as for licensees under the network facility and network services categories. Listing requirements were also removed for applications services and content service providers. In August 2017 Vodacom announced its IPO had been a success, raising TSh476bn ($216.5m) as planned, with 60% from Tanzanian investors and 40% from international investors. With foreign investment in telecoms IPOs now permitted in the first round of share offerings, the DSE could be set for strong medium-term growth, while foreign shareholder demand could in turn support firms’ planned expenditures.
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