USE bets on MTN stock to excite investors despite low subscription in IPO

Saturday December 11 2021
MTN customer care staff

MTN customer care staff attend to subscribers at a past expo. The telco has begun trading on the Uganda Securities Exchange. PHOTO | FILE


MTN Uganda last week started trading its shares on the Uganda Securities Exchange (USE), gaining 2.5 percent following the listing of the stock.

Analysts say the regulator’s move to ease listing rules, saved MTN Uganda from failing to list shares on the exchange.

“Where the exchange waives the requirement for a company to list with float below 20 percent threshold such company (issuer) shall have up to a maximum of three years within which to meet the requisite float threshold,” Paul Bwiso, USE chief executive said while quoting USE Listing Rules 2021

This means the under-subscription made it difficult for Uganda’s biggest telecom company to be listed on the USE main market.

Last month, MTN Uganda opted to sell a fifth of its stake to East African investors when it floated its initial public offer (IPO) on the Kampala bourse. The company had received regulatory approvals to list 20 percent of its shareholding.

Uganda’s Capital Markets Authority CEO Keith Kalyegira said the IPO is expected to raise about $1.2 billion.


“The announcement float shares is a major step towards delivering on our plan to list on the USE,” MTN Uganda Chairman Charles Mbire said.

The IPO was expected to boost the number of retail investors at the Uganda Securities Exchange from about 40,000 to 200,000.

The listing also makes MTN Uganda the second publicly traded telecom in East African Community after Safaricom’s IPO on the Nairobi Securities Exchange in 2008.

At least 35 percent or 1.575 billion of MTNs shares were not taken up by investors, in what MTN Uganda Chief Executive Wim Vanhelleputte blamed on investors’ shying away from the stock on Initial Public Offering drying in Uganda for the past 10 years.

While the promoters expected to raise $250 million fresh capital from the IPO, only $151 million was raised from the sale of 2.9 billion shares.

Uganda’s National Social Security Fund growing appetite for shares in East African big telecoms also helped MTN Uganda’s IPO not to go under.

According to the share allocation results, the public pension body bought 8.84 percent stake in MTN Uganda, in a transaction that positioned the pension’s body as, second-biggest shareholder. With several investors buying stakes in MTN Uganda, MTN Mauritius’s shareholding fell to 83 percent from 96 percent.

“NSSF invested $100 million for the stake in MTN Uganda,” said Richard Byarugaba NSSF managing director.

NSSF also has a reasonable shareholding in Kenya’s biggest telecom Safaricom. According to NSSF’s Integrated Report for the year ending June 30, 2020, its internal equity portfolio in Safaricom hit $93.2 million.

NSSF’s internal equity portfolio in both Safaricom and MTN Uganda stands at Ush692.3 ($194 million).

“MTN Uganda and Safaricom are cash-rich, have a strong growth outlook, and are giving back money to shareholders,” said Byarugaba.

While few investors bought shares during the MTN Uganda offer, the digitalisation of securities account opening boosted the participation of retail and corporate investors.

More than 93 percent of the applications were made via the m-IPO platform, with the majority of these investors new market participants. USE said 21,394 individuals and corporates participated in the IPO, out of which 20,894 were Ugandan retail and institutional investors. This represents 98 percent of the total number of participants.

“During this period over 74,000 SCD accounts were opened with the USE Securities Central Depository growing the number of SCD accounts held by the USE SCD from approximately 38,000 accounts pre-IPO to 113,421 accounts to date,” says Bwiso.

The MTN shares more than double the local market capitalisation currently at $1 billion to $2.3 billion.

The totaled capitalisation increase from approximately $5.5 billion to $6.46 billion. The price climbed to $0.06 after trading began from the IPO share price of $0.05. The fears were due to the result of the IPO that showed that the public had purchased only 65 percent of the shares that the company offered in the IPO and many reasons for the under subscription were suggested including low demand.

However, “This will potentially be the largest IPO on the Ugandan market and will be delivered primarily through a digital paperless/ green platform which is the first of its kind in East Africa,” said MTN Uganda in a statement.