Why Ugandans did not show interest in MTN IPO

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BY Moses Kaketo

For the last couple of years, MTN Uganda, the market leader with market share of 70% led several campaigns. Ugandans turned up in numbers: when they sponsored the Uganda Cranes, Ugandans responded positively.
Ugandans have also turned up for the annual MTN marathon.


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After 42 days, Preliminary reports indicate MTN sale of shares to the public, the telecom giant, performed below expectations.
The exercise was expected to bring about 108,000 new shareholders. However, media reports indicate, by the close of the IPO, the number was slightly above 60,000.
The company was also expected to collect $250m from the IPO. Reports further show the figure is far below target.
The final details of the IPO will be out on 3rd December 2021.Experts say that this will be the first undersubscribed IPO in Uganda.
Never mind, for this IPO alone, MTN had a direct Ugx. 721 million budget for advertising and public relations during the 42 days. That is Ugx. 17m daily for 42 days.

What went wrong?

Ugandans have learnt the hard way. All IPOs in Uganda after Stanbic Bank are trading below IPO price, (CIPLA: at 95/= from IPO 256/=, UMEME: at 198/= from IPO 275/=, NIC: at 5/= from IPO 24* NIC IPO adjusted for bonus issue.
While some analysts blame the economy for the MTN IPO poor performance, it should be noted that many local investors are yet to recover from the Cipla Quality Chemicals IPO.
For example, a local investor bought 4,000,000 shares at Cipla IPO at Ugx. 256 in 2018 worth one billion 24 million Uganda shilling (1,024,000,000/=)
Five years later, the same shares are worth three twenty nine million (392,000,000/=) today at price 98/=
What a loss!
This is one the many Ugandans who have lost their hard earned money through buying shares on the Uganda’s Stock market.
Local retailer investor Andrew Muhimbise heaps blame on –Capital Markets Authority (CMA)
‘ ‘Uganda’s stock market has become a slaughter house of sorts for unsophisticated investors with the CMA adept at majoring in minors and minoring in majors, Protecting Your Investment, the CMA slogan is long forgotten.’’
He adds: the NIC, UMEME, CIPLA IPOs were never underwritten and now MTN IPOs has followed suit. In the (MTN) prospectus it is clear there in no Underwriter for the IPO (page 36 7.13.7).

‘‘Underwriting is paramount for an IPO and at this stock market it last happened with Stanbic Bank’s IPO eons ago. Its basic premise is about pricing. It is when an investment banker or insurance company undertakes to buy all shares of an IPO, as sophisticated investors they safeguard the investing public by ensuring to purchase all shares at an agreed IPO price, in effect they will do their analysis and be comfortable with a certain price to pay which then becomes the IPO price.’’

MTN: Where is all the money?

MTN being a cost center of excellence has ensured that even if it is a market leader with 53% market share, its main rival Airtel with 31% market share is by far more profitable with 2020 net profits of Ugx. 321 billion former verses Ugx. 405 billion for the latter.
It is for this reason that many corp orates, corporates orgazantions, SACCO’s either kept off MTN IPO or chose to buy shares for as low as Ugx. 100,000. The same group is capable of buying shares worth over One million Uganda shillings.
No-wonder, The Company was expected to collect $250m from the IPO, but there are indications that the figure will be far below that target.

The biggest turn off

Ambition 2025 is an MTN Group strategy aimed at establishing a separate MTN Group financial technology structure in the course of 2022.
MTN on page 51 by saying that the separation and consolidation of the financial technology (Mobile money) will be undertaken on arms’ length basis and in line with market standard ensuring equitable treatment of minority shareholders (YOU)
The UCC licence that compels MTN to sell shares to the public does not cover the Mobile Money business as elucidated on page 65 9.5 of the prospectus.
From the above MTN has told prospective investors that there will be a transfer of the Mobile Money subsidiary away from MTN Uganda that will be listed
This is going to come to a devastating reality within 12 months of listing, the very reason CMA and MTN couldn’t dare put 5 years financials forecast as it would clearly show this.
MoMo in the year 2019 accounted for 22% of MTN Uganda’s revenue and 42% of its net profit. In 2020 revenue contribution was 23% and 45% of net profit.
One marvels at such a business cash cow being stripped out of the company like removing an engine from a car or better it is analogous to taking Mo’Salah out of a Liverpool game- Think about it!
It is likely that by next year when it’s taken out of MTN Uganda it will be responsible for more than half of MTN Uganda’s net profit.

Could this also have scared away potential local investors?

What Are the Best Metrics to Evaluate a Telecommunication’s Company?
When analyzing a company’s financial statements, investors will review a variety of metrics, including assets, liabilities, stockholders’ equity, debt, and free cash flow. When taken alone, any one of these fundamental indicators will generally not be enough to confirm a company’s viability as a potential investment. However, when combined, these metrics can paint a clear picture to an investor of a company’s financial well-being and potential for profitability.

Three additional metrics stand out that can help investors in their evaluation process: average revenue per user (ARPU), churn rate, and subscriber growth.

To be continued

More about the author: Moses Kaketo

also read: LYCA MOBILE: the telecom company that ‘died’ the very day it launched in Uganda

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