Will Vodacom allow foreigners to buy shares after missing target?

Vodacom Tanzania Plc, which recently offered 25 per cent of its shares in an initial public offering, has failed to meet the set threshold, raising questions about the ability of Tanzanians to absorb shares of the country’s largest telco.

The IPO, offered on March 9, closed on April 19 and failed to raise the Tsh560 billion ($248.5 million) exclusively allocated to Tanzanians.
Vodacom Tanzania, a subsidiary of Vodafone Group, on April 19, extended the offering for three more weeks to give time for investors to purchase the shares.

“This extension will help ensure full participation by retail and institutional investors, who have requested more time,” said Vodacom Tanzania corporate affairs and public relations director Rosalynn Mworia. “We thank all Tanzanian investors who have participated in the initial offer to date and look forward to welcoming new shareholders.”

• READ: Why Vodacom Tanzania is extending IPO deadline

The failure by the telco to raise the targeted capital has revived memories of the 2011 Precision Air IPO.

That year, the privately owned airline issued an IPO, seeking to raise Tsh28 billion ($16.5 million) to expand its routes and purchase new aircraft, but only managed Tsh11.84 billion ($5.25 million).

In the case of the Vodacom offering, market analysts cite overpricing of the company’s net asset value.

The Tsh476 billion ($212.8 million) offer is about 25 per cent of the company’s Tsh1.9 trillion worth ($844.9 million).

But experts say that if the IPO fails to hit the target, it will not necessarily hurt Vodacom, but the share buyers.

According to Laurean Malauri, chief executive of Orbit Securities, the Precision Air IPO was undersubscribed largely because investors were not comparing Precision Air with another airline, but rather with Tanzania Breweries Ltd (TBL), which appeared to be more attractive at the time.

TBL, a SABMiller subsidiary, is listed on the Dar es Salaam Stock Exchange. It is among the bourse’s top movers, with a share price of Tsh12,000 ($5.3) as of last week.

Experts say that if the IPO flops, the company may have to rethink the 25 per cent local ownership, from which other East Africans were locked out.

“Equity markets need time to develop and I think 25 per cent is rather ambitious, as there is limited equity in local hands waiting to be invested. That’s why you see the shareholding structure of a couple of large organisations favour wealthy and politically connected individuals, who have access to capital,” said George Kalebaila, director for telecoms and Internet of Things in Africa at IDC. 

Analysts advise the regulators to consider opening up the offer to foreigners if it will still be undersubscribed after the three-week extension.
But the IPO’s lead advisor, Orbit Security, said they will stick to the requirement of the law and there will be no foreign involvement.

Juventus Simon, Orbit Security general manager, told The EastAfrican than they are sure that the threshold will be met in three weeks.
He declined to disclose how much the offer has netted so far, saying that subscriptions are going on and the compilation of the raised funds will take place afterwards.

The IPO blocked foreigners from buying the 25 per cent stock until it listed on the DSE in early June.

“This is a legal matter. It is stipulated in the domestic ownership laws,” said Capital Markets and Securities Authority spokesperson Charles Shirima.
The South Africa-based parent company, Vodofone South Africa, is only listed on the Johannesburg Stock Exchange.

Vodacom Tanzania was launched in 2000, and the country is the group’s second biggest market, with 13.4 million active subscribers as at December 31, 2016.