Over the past few days, a debate has been raging in the traditional and social media space about the rationale for MTN floating shares on the Uganda Securities Exchange. This followed an appeal by President Museveni to the MTN Group to work towards the listing of MTN on the local bourse in order for Ugandans to have some ownership into the telecom giant. The President’s request was premised on the need to create wealth for Ugandans – by providing investment opportunities for them; and the need to minimize capital flight.
This is not about MTN – this is about telecommunication companies that operate under a license issued by the Government. Any Government is free to attach any conditions to a license it issues, and a company is not under any obligation to accept these conditions in which case they would elect not to renew their license.
An editorial opinion in one daily opined that MTN should only look to sell shares to the National Social Security Fund (NSSF), the largest institutional investor in Uganda, “since the Fund has the ability to protect investments in such a large multinational, and would therefore be protecting the individual investors” (NSSF subscribers). But while it would be worthy for the fund to own a significant stake in MTN, just like it does in many other companies listed on the Uganda and Nairobi Securities Exchanges, it is equally good for MTN as a business or any such other public interest company to consider providing for widespread retail ownership of its shares.
The current approximately 700,000 active membership of NSSF is a small fraction of the total working population of Uganda estimated at about 15 million people. This means that “ring-fencing” an offer to only institutions like NSSF would essentially deny the majority of Ugandans, (many of who are MTN subscribers), with disposable income or savings a chance to invest their savings and be part of a successful growth story.
One way of increasing the chances for a successful sale without locking out anyone, is offering a smaller percentage to retail investors (individuals) compared to what is allocated to institutional investors. This was the case for the most recent IPO in Uganda, where drug manufacture, CIPLA Quality Chemicals Limited issued up to657,179,319 shares, 90% of which was allocated to institutional investors while10% was left for the retail pool. This increased the chances of a successful offer without affecting individual investor participation in the offer.
In Ghana, 89% of the August 2018 MTN public offer was subscribed to by institutional investors.99.7% of the offer was subscribed to by 127,826 Ghanaians! While these contributed only 39% of the capital raised, the offer was able to attract new investors into the Ghanaian capital market, many of who could have invested in the MTN Group listed on the Johannesburg Stock Exchange but were probably attracted to the Ghanaian unit because of its relative profitability.
Considering the success of MTN Uganda, as perhaps one of the most recognized brands in Uganda and arguably the company with the highest turnover in the country, a prudently valued public offer is more likely to be subscribed to by at least 50,000 Ugandans, considering the large number of mobile money agents, airtime dealers, employees, and subscribers.
To guard against foreign dominance of the offer, priority could be given to East African institutions and individuals as part of the effort to build a strong regional economic union.This has been done in the past and would therefore not be a peculiar practice.
Generally, unlike private companies, public listed companies have a fairly higher level of transparency driven by their accountability to several diverse shareholders and the scrutiny that comes with that. However this would not be a challenge to MTN Uganda considering the administrative support from the MTN Group in South Africa which has over 125,000 shareholders including the Public Investment Corporation which invests on behalf of the South African Government pension scheme and owns14.9% of the MTN Group. Therefore restricting an offer to institutional investors on the basis of perceived technical ability would instead limit attainment of the bigger picture and other accruing benefits for the company,such as the public relations value, and customer and employee loyalty; as well as to Uganda’s financial market in general.