Category Archives: Safaricom IPO

Vodacom IPO launched in Tanzania: a Prospectus Peek

Quick note excerpts from the 140-page Vodacom IPO prospectus. There’s even a Swahili version  (PDF) of this Vodacom Tanzania PLC prospectus.

About Vodacom

  • Vodacom Tanzania PLC is a subsidiary of Vodacom Group (South Africa), which in turn is a subsidiary of Vodafone Group Plc (UK). Vodacom Group Limited is the beneficial owner of 82.15% of Vodacom Tanzania. Mirambo Limited directly holds the remaining 17.85%.
  • Vodacom is Tanzania’s leading mobile operator. Market share: Vodacom Tanzania (31% ), Tigo (29%), Airtel (26%), Halotel (7%), Zantel (4%), Smart Telecom (2%), TTCL (1%)
  • In 2016 Vodacom had 12.38 million customers (including 5.4 million active data customers) and an ARPU of TZS 5,972. Vodacom Tanzania has 570 employees, 189 nationwide retail points, in excess of 17,000 freelance distributors and 75,000 mobile money agents.
    Vodacom is part of a “consortium” (with Tigo, Airtel, Zantel) that has constructed about 400 km of metro fibre, in Dar es Salaam, Dodoma, Morogoro, Mwanza and Arusha, as well as over 1,300 km of backbone fibre linking the major cities of Dar es Salaam, Dodoma, Arusha and Moshi.
  • Vodacom Tanzania estimates that the total net proceeds from the Vodacom IPO issue of 560 million new shares, after deducting expenses (and assuming that the offer is fully subscribed), will be TZS 469 billion (~$210 million)

Use of proceeds:

  • Vodacom Tanzania intends to apply such net proceeds to:
    (i) The execution of inorganic growth opportunities geared towards growing and maintaining Vodacom Tanzania’s leading market position (elsewhere the prospectus mentions that Vodacom Tanzania may consider mergers, acquisitions or strategic investments),
    (ii) Working capital augmentation for Vodacom Tanzania; and
    (iii) general corporate purposes for Vodacom Tanzania (elsewhere it mentions that part of the Vodacom IPO proceeds will be used to repay loans from the Vodacom Group and Mirambo).

Risks & Regulation

  • (this is a) Forced listing & IPO: The Company converted from a private limited company to a public limited company in November 2016. Following the 2016 Finance Act, all licensed telecommunication operators are to have a minimum local shareholding of 25% of their authorized share capital issued to the public and listed on the Dar es Salaam Stock Exchange (DSE).. penalties may be imposed by TCRA should the IPO not take place within six months from 1 July 2016.

Non-compliance:

  • The Bank of Tanzania allowed Vodacom Tanzania to continue offering Mobile Money Services whilst the license applications are pending (it has applied for Payment System License and will apply for an Electronic Money Issuer License)
  • Vodacom Tanzania is also working on forming a separate M-Pesa corporate entity to comply with regulations.
  • Vodacom Tanzania is working on a project plan to migrate all its Network Operating Centre (NOC) operations to Tanzania to comply with an in-country NOC requirement.
  • Vodacom Tanzania is also working on network optimisation and modernisation initiatives to ensure compliance with Quality of service (QOS) obligations.

Government Moves

  •  Issuance of new licenses: presents a risk to the profitability of the company. The awarding of a new license to a new operator last year saw the advent of an eighth licensee to an already intensively competitive market. 99% of Vodacom Tanzania’s customers are prepaid (But) It is unlikely that there will be a new entrant into the Tanzania telecommunication market. Any new player in the Tanzania market should not pose a significant competitive challenge in the period to 31 March 2018 because of market penetration and lead time to setting up a telecommunication network.
  • Spectrum: Vodacom Tanzania is on record that it requires additional spectrum to meet quality of service requirements (QOS), especially for data services. The decisions taken by the Government on the timing, fees, and allocation of digital dividend and other spectrum will have a major impact on Vodacom Tanzania’s ability to serve its customers,
  • Tax Risks:  “The complex tax environment in Tanzania poses a number of challenges to Vodacom Tanzania.”  Two new taxes going up may affect Vodacom Tanzania’s profitability: Draft amendments to the UCSAF Regulations seek to increase the service levy from 0.3% of service revenue to 1% of service revenue while a draft revision of the Local Government Finances Act (LGFA) proposes an increase in the rate of service levy charged from the current 0.3% to 1.5% of turnover net of value added tax and excise duty for all businesses. The LGFA further proposes to empower local government authorities to impose levies on telecommunication transmission towers.
  • Vodacom Tanzania already has a number of tax matters and litigations that are pending at various appellate levels. Tax litigation with the Tanzania authorities over TZS 100 billion  (~$51m) calculated on issues like undersea fibre, towers, foreign exchange, losses, withholding taxes, VAT, roaming, interconnection licenses capital allowance). There’s also a potential $500 million from a tort conspiracy case over frequency allocation and a half dozen other staff cases.

Performance:

  • Vodacom Tanzania’s audited annual Accounts for the years ended 2014 and 2015 showed a profit before tax was TZS 166 billion in 2014, TZS 78 billion in 2015 (from revenue of TZS 908 billion). For 2016 it was 74 billion in 2016 (from revenue of TZS 923 billion)
  • They project a project a pre-tax profit of TZS 82 billion for March 2017 and  TZS 137 billion for March 2018

Strategies

  • Continue to grow M-Pesa There has been the phenomenal success story of mobile financial services in Tanzania, where Vodacom Tanzania remains the market leader in terms of customer share and has significant brand equity…Vodacom M-Pesa makes up in excess of 20% of Vodacom Tanzania’s service revenues
  • Benefit from Vodafone: Vodacom Tanzania will, however, remain part of the Vodafone Group and will continue to benefit from their scale of operations and expertise.
  • Vodacom Tanzania may consider mergers, acquisitions or strategic investments.

Other Companies

  • In 2016, the Group acquired 100% of Shared Networks Tanzania (SNT) from its shareholders for $15 million
  • The group remains committed to its decision to exit its investment in Helios Towers Tanzania (HTT ), an associate in which the group holds a direct investment of 23.78%. In September 2013, Vodacom Tanzania PLC decided to sell and lease back its passive equipment to HTT.

Vodacom IPO Expenses

Issue expenses are estimated at TZS 7.1 billion (about $3.9 million) and include amounts for the lead advisor and sponsoring broker’s fees (Orbit Securities) TZS 650M, lead receiving bank fees (National Bank of Commerce) TZS 872M, Capital Markets & Securities Authority fees TZS 283M, Dar es Salaam Stock Exchange listing fee of TZS 1 billion, and all authorised collecting agents will share TZS 3.8 billion.

For Investors

  • 560 million new shares (or 25%) are being sold, and all the shares will be listed on the DSE. Vodacom IPO shares will only be sold to Tanzanian citizens and entities incorporated in Tanzania in which Tanzanian citizens have a majority beneficial ownership (no shares for East Africans unlike previous IPO’s in the region)
  • The minimum investment is TZS 85,000, equal to about $38 or KES 3,926. This is for 100 shares at TZS 850, and after that buy in multiple of  10 shares.
  • Buy via phone: Using their phones, Tanzanians can apply for shares through the DSE platform (dialling *150*36#) and also pay for shares via M-Pesa (by dialling *150*00# and entering the business number 236622, and a unique DSE reference number)
  • After the IPO. the public will own 25% alongside (Vodacom and Mirambo), and the dividend policy is to pay out at least 50% of earnings after tax but at the discretion of the board of directors. (31 March 2016 EPS was 34.65 TZS and the group expects to pay dividends of TZS 16.5 billion in FY17.
  • Timetable: The Vodacom IPO opened on 9th March, and closes on 19th April. The results will be announced on April 28, the listing will be on 16 May, and an AGM is scheduled for 1st June 2017.

Will the Vodacom IPO be as successful as the Safaricom IPO was in Kenya a decade ago?  The Vodacom IPO certainly seems to be selling well, attracting lots of first time Tanzania investors, in the first two days.
100 USD equals 223,000 TZS and 100 KES = TZS 2,165.

Safaricom Bonus

Yesterday Safaricom announced an interim dividend of Kshs 0.68 per share and this will add up to a payment to their 600,000+ shareholders a total of Kshs 27.5 billion. This is in addition to the Kshs 0.76 per share dividend for their year which ended in March 2016

Bob Collymore, CEO of Safaricom, said: “There is room for this one-off special dividend of Ksh27.5bn due to the cash position of the company, and the significant retained earnings of Ksh82bn. This is an additional dividend to what we expect to recommend at next year’s AGM for the year ended 31st March 2017. The special interim dividend will be paid out on or prior to 1st December 2016.”

But investment analyst Sunil Sanger points out the Safaricom may have erred in the timing of this announcement. Safaricom bonus dividend

It’s been a busy week at Safaricom who also announced a commitment  to promote the use of renewable energy , opened a 45th retail shop at The Hub in Karen, Nairobi (they will open 5 others in Nairobi and Rift Valley) and also dropped roaming charges for voice and data calls for 200 networks in 52 countries including Tanzania, China, Dubai, UK, USA, South Africa, Ghana, Netherlands, DRC, Germany, Italy, Nigeria, Australia, Botswana, Cameroon, Denmark, Finland, Israel, Jamaica, Japan, Mozambique, Pakistan, Singapore,  Spain, and Thailand.

In China for example, Safaricom subscribers roaming on China Mobile will now be charged Sh50 to call back home and enjoy a low of Sh10 per minute to call within China, down from the former rate of Sh360 and Sh130 respectively. Data pricing will fall to Sh14 per MB while roaming on China Mobile and China Unicom, down from the previous rate of Sh1, 900.

$1 = Kshs 100

Shares Portfolio May 2015

Comparing performance to last quarter and a year ago.

snoop

Compared to last quarter, the portfolio is down 3% while the NSE 20 share index is down 10% since February 2015.

 

The Stable
Bralirwa (Rwanda)  ↓
Centum (ICDCI)  ↓
Diamond Trust  ↓
Equity –
KCB  ↓
Kenya Airways  ↓
Kenya Oil  ↓
Mumias  ↓
NSE ↑
Safaricom ↑
Scangroup ↓
Stanbic (Uganda) ↓
Unga ↑

Changes
In: Equity Bank
Out: None
Increase: Kenya Airways, Kenol, Mumias
Decrease: None
Best performer: Safaricom (up 11% this quarter)
Worst performer: Kenya Airways (down 34%) , Mumias  (down -33%)

Looking Forward To:
– Bank profits & dividends from banks (KCB) and Safaricom.
– More M&A deals from Centum after their bond

Other Events:

– Safaricom’s super profits continued, and defied expectations of many, with profits going up 38% to $336 million. The company is crucial to the Kenya government in that will pay almost $600 million in taxes & licences fees this year, plus a Kshs 9 billion ($100 million) dividend that works about to about 10% of the country’s tax revenue!

–  A Kenya Airways full year loss expected to be announced this month amid other restructuring, debt, bailout, partnership (is the KLM shareholding good or bad?) discussions. There was a comment from a KQ executive who said that “our profit on each passenger can’t buy a good cup of coffee”.

– Just across the border, in Rwanda, was the IPO of  Crystal Telecom, in which 20% of MTN Rwanda was sold to the public and will be listed on the Rwanda stock exchange. The IPO which closed last week, cost a minimum investment of $150, and was open to all East African citizens.

Nairobi New Media Stocks, 5 Years Later

It’s been over five years, since a wave of new media stocks appeared at the Nairobi Stock Exchange  (NSE) including Access Kenya Safaricom, and Scangroup. They are all in the news this month, but for different reasons.
For Access Kenya, the deadline for shareholders to vote on a takeover by Dimension Data was extended by a day due to a national Holiday last week, However, Dimension Data just announced that they have received acceptances from 75% of shareholders and approval the Competition Authority of Kenya and will now proceed with the takeover which will leading to a de-listing of Access Kenya at the NSE.
Safaricom shares seem to have stabilized in the Kshs 7-8 price range  after spending quite a bit of time at Kshs 3/=, well blow the IPO price of Kshs 5/= in 2008. This disillusioned a lot of retail shareholders who bought their shares hoping to quadruple them when they listed, but then had to sell them at a loss. The company has since weathered many changes, but remains the market leader in Kenya, thanks largely to M-Pesa and the floundering of their rivals (Orange, Airtel and Essar). 
Scangroup got an investment from the WPP, in 2008 who gained a controlling interest for about $18 million. The shares traded at about Kshs 72, and while they have lagged other shares this year, this is still a tremendous gain from the IPO price from Kshs 10.45. 
This week, WPP announced, that they would seek to increase their stake to just over 50% in a deal worth about $95 million. This will be done through a combination of cash, new shares and exchange of partnerships in joint companies (Ogilvy & Mather, Ogilvy Africa, Ogilvy (in Kenya, Tanzania, Mauritius) Millard Brown (East Africa, and Mauritius), and Hill & Knowlton (East Africa and Africa) which will become full subsidiaries of Scangroup over the next one year.

Shares Portfolio May 2010

A rising tide lifts all boats

Tracking changes from three months and a year ago

The Stable


Diamond Trust ↑
Kenya Airways ↑
KCB ↓
Scangroup ↑
Stanbic (Uganda) ↑
Uchumi ↔
Performance: Portfolio is down 2% in value from February after exit from Safaricom which was about 10% of Portfolio, while the NSE is up 18% since February 2010
In/Out: Exited Safaricom completely, after accumulating shares since the 2008 IPO. One of the most liquid stock at the NSE, with lot of foreigner interest, and one I will buy back later
Increase/decrease: None
Best performer Diamond Trust and Scangroup, each up 23%
Worst performer: KCB down 6%

Events
Unexpected Gains/Losses
– Uchumi lifting itself out of receivership and applying for re-listing at the Nairobi Stock Exchange
– The communication spat pitting Safaricom versus the three other mobile companies, and another Scangroup buyout deal, both featured in this post here.

Other events
– The Housing Finance merger dance with Equity Bank here
– Another share split announced by Kenol Kobil (2nd time in six years)

Looking forward to
– Dividend payments expected from Diamond Trust, KCB, Scangroup, Stanbic (Uganda)
– @coldtusker says to watch kapchorua Tea at 140, Kenol at 93.5, Kenya Airways 56, and KPLC 185 and compare 6 months from now while Riba Capital is watching tea stocks, KPLC and Housing Finance.