Opening shares to East Africans will depend on telecoms - CMA

Telecoms will decide whether to open up their shares to East Africans, according to Capital Markets Authority (CMA).

Speaking to Daily Monitor yesterday, Mr Keith Kalyegira, the CMA chief executive officer, said there are no guidelines to restrict telecoms from offering shares to investors across the East African region.

“No, there are no specific guidelines. Normally, the shares are also open to East Africans. It depends on the company’s allocation as indicated in their prospectus. They will follow regulations just like any other company that is listing at the initial public offering stage,” he said.

Mr Kalyegira was responding to a reference by Ms Irene Kaggwa, the Uganda Communications Commission acting executive director, who told DailyMonitor that CMA would be issuing listing guidelines for the telecoms.
“CMA, as the authority responsible for listing in Uganda, is the one that provides them with the guidelines on what they must and must do and not do,” she said.

Mr Kalyegira, however, said priority will be given to Ugandans given that the background of telecoms’ listing was premised on the national broadband policy.
MTN in a recent interview made no mention of East African investors, noting that it expects to complete the listing by June 2021 and will attract both institutional and individual investors.

Mr Stephen Kaboyo, the Alpha Capital managing partner, said opening up MTN’s shares to East Africans speaks well to the idea of regional financial markets integration, noting it will not affect Ugandans.

However, he said, he anticipates that the MTN stock could be oversubscribed given the level of institutional and retail liquidity and the blue chip nature of the telecom.

Uganda, in 2018, passed the national broadband policy, which among others, made it mandatory for national telecom operators to list shares on the Uganda Securities Exchange (USE).

While the policy document recommended listing 30 per cent of the telecoms shares, the figure was later negotiated down in the Uganda Communications Commission (UCC) regulations to 20 per cent.
The policy seeks to ensure local ownership of the multinationals.

However, after the IPO, there is no guarantee of local ownership once the shares are traded in the secondary market.
In the primary market, an investor gets securities directly from the company through the IPOs, while in the secondary market, one purchases securities from other investors.

“Once shares are floated, it is an open market. You cannot prohibit anyone from trading. Though people usually hold onto their shares, there is rarely a high turnover of shares in the secondary market, even if it is there, it is not significant,” Kaboyo said, explaining the possibility of foreign investors buying into the telecoms from national or local investors.
Uganda is expected to have three national telecom operators based on geographical coverage, among them MTN, Airtel and Utl.

The law
The national broadband policy recommends that shares to the public through a primary offer be ring-fenced to Ugandan or East Africans.

In the event of an under subscription, the policy says, the telecom can proceed to undertake a secondary offer through which it can open up to all categories of investors.

A secondary offer is defined by investopedia as the sale of new or closely held shares by a company that has already made an IPO.

The policy also notes that over 50,000 retail investors are expected to participate directly and indirectly in the IPO.

[email protected]