Tanzania has opened a window for foreigners to buy shares in Vodacom Tanzania through an initial public offering (IPO) seeking to raise Tsh476 billion ($208.5 million).

The move is meant to enhance the issue’s chances of success.

There were concerns that the share sale may not be fully taken up following the exclusion of non-Tanzanians from the flotation.

On February 28, when the offer was announced, it became clear that foreigners, including citizens of other East Africa Community member states -- Burundi, Kenya, Rwanda and Uganda -- would not be allowed to participate in the IPO ordered by the government to promote local ownership of businesses.

This raised fears that the flotation was likely to be undersubscribed given recent liquidity trends at the Dar es Salaam Stock Exchange (DSE) where the telco is expected to be listed on May 16.

READ: East African investors barred from Dar telcos IPO

The prospectus of the offer released on Tuesday, however, shows that foreign investors will get a chance to buy the shares should Tanzanians not take up the entire issue.

This means that nationals of other countries will be underwriting the offer which opens on Thursday March 9 and closes on April 19.

High valuation

“Foreigners are able to participate in the issue although we note that locals are given priority and foreigners can only buy if the IPO is not fully subscribed by local shareholders,” investment analyst Exotic Partners said in its impressions of the IPO.

Foreigners, however, will have to dig deeper than they would if they were buying shares in other telcos listed across Africa. With the IPO valuing Vodacom Tanzania at $208.5 million, the price earnings (PE) ratio (an indication of how long it would take an investor in years to recoup the capital outlay) is 24.5 times against 19 times for telcos in other frontier markets. Management forecasts for 2017, Exotix says, showed the forward PE would be 30.2 times.

Apart from the high valuation, the analysts identified a downward pressure on tariffs, registration of customers and currency weakness as risk factors that would adversely affect the Vodacom business.

Tigo, Airtel and Zantel are also expected to be listed at the DSE under a directive passed with the Finance Bill 2016 that all mobile network providers list at least a quarter of their authorised share capital at the stock exchange by January this year.

Vodacom controls 31 per cent of the Tanzania market telco market followed by Tigo, Airtel and Halotel.