Airtel Uganda is racing against time to list 20 percent of its shares on the Uganda Securities Exchange (USE) before a June 30 deadline, even as players wonder if the market is ready for another initial public offering so soon after MTN Uganda suffered an under-subscription late last year.
MTN Uganda’s market value has plunged weeks after it started trading but Uganda Capital Markets Authority (CMA) Chief Executive Keith Kalyegira said the two telecoms have different fundamentals.
Kalyegira told The EastAfrican that consultations to list Airtel Uganda shares on the bourse have started, but he added that “inquiries with Airtel are not formal,” which means the second-largest telecommunication company in Uganda is yet to submit its draft prospectus for scrutiny.
Stockbrokers in Kampala have intimated that it is in the interest of the CMA to facilitate Airtel Uganda’s listing as it will expedite categorisation of the Uganda bourse as a frontier market in the Morgan Stanley Capital International (MSCI) index.
In Africa, the Nairobi Securities Exchange, the Stock Exchange of Mauritius and the Nigerian Stock Exchange are among bourses that fall in the frontier category of MSCI.
Growth ambition
On several occasions, Kalyegira has maintained that the frontier market status puts Uganda on the radar of large institutional investors that currently ignore smaller and less liquid exchanges.
Kalyegira said the USE needs at least two companies with a net worth of $700 million on its listing and the telecom sector is betting on Airtel’s listing, although he maintains its value is unknown.
The Uganda National Broadband Policy (2018) compels telecoms to float 20 percent of their shares on the Uganda Securities Exchange. Airtel’s National Telecom Operators (NTO) Licence became effective July 1, 2020.
The challenge, however, is that MTN stock performance has been disappointing to both old and new investors. Its Uganda share price has plunged to a 10 percent low, devaluing the company by more than $134.45 million.
Uganda capital market players attribute the plunge to retail investors who rushed to liquidate their holding to raise cash, specifically to pay school fees. Schools in Uganda reopened this month after a two-year pandemic break when family incomes have been disrupted.
“Retail investors will do anything to get cash to pay school fees,” said William William J. Nyakatura, managing partner Kimsman Advisory.
At least 998,150 shares were traded on January 10, the day schools reopened, the highest ever recorded on the MTN counter.
Trading data shows that the stock is trading below the Ush200 ($0.056) IPO price. The share price plunged from $0.058 on December 6, 2021, to settle at $0.052 per share on January 19, 2022.
At this price, stockbrokers say investors exiting the counter below the Ush186 threshold per share are making a loss.
“Over 95 percent of retail investors in MTN Uganda Pcl say they are raising school fees,” said Francis Gajja, a stockbroker at Equity Stock Brokers Uganda Ltd.
More MTN shares were sold off on the day schools opened.
According to the Uganda Communications Commission (UCC) the company paid $74.6 million, including VAT of 11.4 million, for the licence.
Within few days of trading, trading data from the Uganda bourse shows that at least 2.57 million shares valued at $139,247 have been traded. This is an average of 122,597 traded shares per session, sending signals that the counter is liquid.
MTN Uganda is the fourth most traded stock on the Uganda Securities Exchange over the past four weeks (Dec 20, 2021 - Jan 17, 2022).
