Airtel seeks Shs800b from IPO 

Airtel has indicated it will seek to raise at least Shs800b through an initial public offering (IPO) beginning today, before closing on October 13. 

The IPO will eventually see Airtel become the second telecom to list on the Uganda Securities Exchange (USE). 

In details contained in the telecom’s prospectus, Airtel indicated that at least eight billion shares, which is equivalent to 20 percent, will be available to the public at a cost of Shs100. 

The IPO is in fulfillment of a licensing requirement under the National Broadband Policy, which requires all telecoms to allow Ugandans have a share in some of the country’s most profitable companies. 

Airtel, which is valued at Sh4 trillion, also indicated applicants will be limited to above 2,500 share. 

Crested Capital will be the lead sponsoring broker while Absa will be lead transaction adviser and receiving bank. 

Katende, Ssempebwa & Company Advocates and Custody and Registrars Services are the lead transaction legal advisor and share registrar, respectively, while Ernst & Young are the reporting accountant.

Airtel is one of Uganda’s largest telecom with subscriber base of at least 14.3 million customers, which give the telecom a market share of roughly 47 percent.

However, Airtel Money Services, has been excluded from the IPO given that the company is now operated independent of mobile telecommunication services under the regulation of Bank of Uganda. 

Projections indicates that Airtel expects a 16.6 percent growth in revenue growth year-on-year in 2023, driven primarily by the voice and data segments.

However, operating expenses are expected to increase by 13.5 percent due to volatile fuel prices, which in the last two weeks have increased by almost Shs200, and planned investment in both distribution and network expansion. 

The prospectus, which was released yesterday, also indicated that Airtel has since 2018 increased its dividend payout to a net profit after tax from 49 percent to 110 percent in 2022 and projects to pay approximately Shs500b for the period ended December 31, 2023 in dividends. 

The company has a dividend policy of 95 percent of retained earnings. 

However, the telecom warned of a number of risks to its operations, noting that they could, in future, impact its earnings. 

Among these, Airtel noted, will be an increase in competition from traditional and non-traditional players including Facebook and WhatsApp that continue to eat into its revenue streams such as pre-paid mobile voice services and text messaging. 

Other risks include a projected decline in voice revenue in the long term, which although they are expected to grow due to an increase in penetration, will eventually suffer with increased usage of internet-enabled voice over functions. 

Voice functions currently contribute about 58 percent of its revenues.

However, the decline is expected to be compensated by a rise in data revenue that has been boosted by an increase in smartphone penetration. 

However, the telecom also cautioned that there was no assurance of continued growth in demand, noting that even when there is growth, the revenues from data and other digital services may not be enough to make up for the sizeable capital investment necessary to upgrade the company’s networks to handle more data traffic. 

At least 35 percent of Airtel’s revenue was generated from mobile data services in 2022, which is expected to increase by 20 percent over the medium term.

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