By VICTOR JUMA

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Airtel Uganda’s majority shareholder Airtel Africa is set to sell additional shares amounting to a 9.11 percent stake in a secondary offer to comply with a requirement to offload a minimum ownership of 20 percent to minority investors trading on the Uganda Securities Exchange (USE).

 The multinational in November 2023 managed to sell 4.35 billion shares equivalent to a 10.89 percent stake in Airtel Uganda’s initial public offering (IPO) that was open to domestic and foreign investors including Kenyans, failing to meet the ownership rule.

Airtel Africa says in its latest annual report that it received a regulatory extension to sell the balance of 3.64 billion shares by November 2026, a move that will see it replicate the moves by MTN Group, which successfully offloaded a 20 percent stake in MTN Uganda in two transactions including a secondary offer concluded last month.

 “On November 7, 2023, Airtel Uganda listed 10.89 percent of its shares on the Uganda Securities Exchange (USE) in compliance with Uganda Communications (Fees and Fines) (Amendment) Regulations 2020, which created an obligation for all national telecom operator licensees to list 20 percent of their shares on the USE,” Airtel Africa says in the report.

Read: Airtel Uganda pays $41m dividend post-IPO

 “The USE granted Airtel Uganda an extension until 6 November 2026 to offer the shortfall to achieve the 20 percent listing.”

Airtel Africa sold its shares at a price of Ush100 ($0.027) each in the IPO that also offered incentive shares on a band of subscription volumes to attract investors. Retail investors who applied for more than 2,500 shares, for instance, received 10 free shares for each 100 shares allocated. Institutional investors who applied for at least 1.85 billion shares were offered 112 free shares for each 100 shares allocated.

 Despite the incentive shares, which amounted to a discount on the offer price, the IPO only managed a subscription rate of 54.45 percent in a transaction that saw Uganda’s National Social Security Fund (NSSF) take up about 97 percent of the allocated shares.

The below par performance of the telco’s IPO was partly attributed to exclusion of Airtel Money which is owned separately by Airtel Africa and a group of other institutional investors. MTN Uganda offered both its mobile money and telecommunications businesses to the investing public.

Airtel Uganda’s share price has declined post-IPO to trade at Ush70 ($0.0189), indicating that its parent firm could offer deeper discounts to meet local ownership requirement in the impending secondary offer.

Airtel Uganda, which offers data, SMS and voice services, has a policy of distributing at least 95 percent of net income as dividends.

MTN Group sold an extra 7.03 percent stake in MTN Uganda’s oversubscribed secondary offer last month, cutting its ownership in the subsidiary to 80 percent. It sold 1.57 billion shares at a price of Ush170 ($0.0459) each in the transaction that featured incentive shares.

Read: MTN Uganda’s parent offers major discount in $58m shares sale

This was a larger discount compared to MTN Uganda’s November 2021 IPO in which the multinational sold a 12.97 percent stake at a price of Ush200 ($0.054) per share while also offering incentive shares.

Pricing of the secondary offer took into account a drop in the share price of MTN Uganda, which currently stands at Ush170 ($0.0459). The sale of MTN Uganda shares was open to Ugandan and foreign investors.

MTN Uganda’s successful secondary offer was also helped by extension of the book closure date for its final dividend of Ush6.4 ($0.0017) per share from June 4 to June 12. This enabled investors who participated in the offer to qualify for the payout. The offer closed on June 10.

MTN Uganda, which aims to pay out at least 60 percent of profits as dividends, has attracted notable Kenyan investors including billionaire Baloobhai Patel, Central Bank of Kenya and the National Social Security Fund.

While Uganda is keen to enforce local ownership rule, Kenya last year changed tune and abolished such requirements, which saw Airtel Kenya freed from seeking investors to take up a 30 percent stake in the firm.