Telcos oppose Tanzania's plans to list them on stock exchange
Saturday August 23 2014
The government has locked horns with mobile phone operators over plans to implement a law making it mandatory for the companies to list on the Dar es Salaam Stock Exchange.
Parliament passed the Electronic and Postal Communications Act in 2009, but its implementation, scheduled for last year, has been delayed. The government has now drafted regulations and is waiting for feedback from stakeholders before enforcing the law.
However, telcos are opposed to the proposal, arguing that the poor performance of the Dar es Salaam bourse could undervalue their companies. The law also requires local shareholders to own at least 35 per cent of the businesses.
Moremi Marwa, the chief executive officer of the DSE, said the bourse was involved in drafting the rules with the Ministry of Communications, Science and Technology.
According to Mr Marwa, the draft regulations are awaiting stakeholders’ input before they are approved and an enforcement date set. Another pending regulation is on listing of mining companies.
“This would give an opportunity to ordinary Tanzanians to own a stake in the companies, widen the economy and increase transparency and accountability in the companies,” Mr Marwa said.
However, the phone companies say the proposal is discriminatory as it does not target all businesses.
“The most contentious issue is a proposal in the draft regulation to have local shareholders own at least 35 per cent,” said a representative of one of the companies.
Three major mobile phone companies – Vodacom, Tigo and Airtel — operate in Tanzania. However, the new law is likely to target Vodacom and Tigo since the government already owns 40 per cent of Airtel.
Despite the law directing the government to negotiate with the mobile phone operators before making regulations prescribing the minimum shareholding requirement and procedure for selling shares, sources told The EastAfrican that the Attorney-General had advised the government to implement it.
“It seems the government is determined to implement the law this year after missing the July 2013 deadline. The law says the minister should consult the stakeholders to make regulations,” the source said.
Industry sources fear forcing private mobile phone companies to sell shares to locals could set a precedent that could dictate the ownership of foreign companies in other sectors.
Zitto Kabwe, the chairman of the Public Accounts Committee has been advocating for the mobile phone companies to list on the stock market. However, he said the move by the government appeared to target specific companies and could spark an investor backlash.
“The rules have to apply to all companies and actually government must start by offering its shares in Airtel,” the legislator said.
The law was passed in parliament in 2009.
The rules also reflect some policy confusion coming after the country agreed to allow free movement of capital in and out of the country.
The Capital Markets Authority has, however, recommended that the government allow foreigners to own up to 100 per cent of companies listed at the bourse.
In 2000, prescribing local shareholding for telcos delayed the rollout of a telecommunication company in Kenya.
Econet Wireless, later Essar — the proprietor of yuMobile — missed out on potential pioneer benefits after it entered into partnership with the broke Kenya National Federation of Co-operatives, just to satisfy a 40 per cent local shareholding requirement.
Econet could not mobilise enough requisite resources for the rollout and had to watch helplessly as its rivals skimmed the cream of the voice and data markets before it was acquired by Essar.
Despite Essar vast outlay, it found catching up too difficult and is now selling its infrastructure to Safaricom and subscribers to Airtel.
The government relaxed the local shareholding rule after the firms promised to offload 35 per cent to local shareholders through the Nairobi bourse when market conditions allowed.