In May last year, MTN returned to the stock exchange in a secondary offer in which it sold 1.57 billion shares or 7.03 percent of MTN Uganda’s unsold shares. Photo / File
MTN Group didn’t just tick a regulatory checkbox in Uganda - it made a tidy gain while doing so.
MTN reported a net increase in asset value in May last year after selling an unsold 7.03 percent stake of its Ugandan subsidiary as part of a localisation strategy.
Latest audited financial disclosures show that in a move to adhere to regulatory requirements of local ownership, MTN Uganda completed the sale of 20 percent of its shares through the stock market last year.
MTN Uganda had already listed 12.97 percent of its stake on the local bourse on December 6, 2021, following an initial public offer (IPO). However, 7.03 percent had remained unsold.
To meet the 20 percent local listing requirement, MTN Group returned to the market on May 27, 2024, offering its unsold stake.
The secondary offer involved 1.57 billion shares, equivalent to 7.03 percent of MTN Uganda, priced at Shs170 per share.
SBG Securities, acting as lead sponsoring broker, managed the transaction. It targeted retail investors, as well as Ugandan, East African, and international professional investors.
To sweeten the deal and draw in smaller investors, MTN Group threw in a bonus: 30 extra shares for every 140 bought - a move designed to make the offer more attractive.
However, to safeguard the integrity of the stock and avoid market manipulation, institutional investors were subjected to a six-month lock-in.
This restriction helped prevent any short-term speculative trading that could distort the stock’s price and ensured a level playing field for all shareholders.
The strategy worked. On June 13, 2024, SBG Securities announced that the offer had been oversubscribed.
While only 1.575 billion shares had been offered, applications returned 3.002 billion shares - almost double the offer, a strong demand that reflected growing investor confidence in MTN Uganda and the appeal of the incentives.
Net equity gain
Now, MTN Group’s financials for the year ended December 31, 2024 r indicate that the transaction saw its stake in the Ugandan subsidiary reduce from 83.05 percent to 76.02 percent.
“Proceeds generated from the sale of shares, net of taxes and transaction costs, amounted to Shs214b (R1, 036m). This resulted in a net gain of R564m (Shs109b) recognised in equity as a transaction with non-controlling interests,” MTN Group notes in its 2024 annual report.
This is a “paper gain” or is an accounting revaluation of the remaining shares under International Financial Reporting Standards (IFRS) because MTN Group didn’t sell the entire subsidiary - just a portion to minority shareholders.
Under IFRS (specifically IFRS 10), such a transaction does not go through the income statement; instead, it's reflected in equity as a transaction with non-controlling interests.
It’s a way of saying: “We didn’t make a profit like from selling goods or services, but the value of our remaining shares went up, and we want to show that increase in our balance sheet.”
Think of it like owning land that suddenly rises in value, not because you sold all of it, but because someone bought a portion at a higher price than what you had it recorded on paper.
In this case, the gain came from the fact that the shares from MTN Group were sold at a price higher than their book value - the value MTN Group had previously used internally to account for its investment.
Because MTN Group sold part of the business at a higher valuation, it had to adjust the value of its remaining stake, and that adjustment shows up as a gain in equity.
In essence, MTN Group not only raised cash from the sale but also saw an uplift in the paper value of its remaining stake, driven by a market reassessment of the subsidiary’s worth.
Short-changed minority shareholders?
The share price in the secondary offer was determined by market demand, and book value of a company is not the same as its market value.
Book value is the accounting value of the asset based on historical costs, depreciation, and other estimates.
It’s not always updated in real time to reflect the current or true market value of a business, especially in fast-growing or complex sectors such as telecoms, where market valuations are often much higher than book value, more so when the company is profitable or has strong growth potential.
For instance, MTN Uganda’s latest financials show total equity of Shs1.197 trillion and 22.4 billion outstanding shares, giving it a book value per share of about Shs53.44.
However, on the Uganda Securities Exchange (USE), the company’s shares were trading at Shs272, apiece by Friday, more than five times their book value.
This gap highlights how investors often value companies based on growth potential, future earnings, and market sentiment, not just accounting figures.
So when MTN Group sold its shares above book value, it wasn’t inflating the price - it was aligning it with what the market already believed MTN Uganda was worth.
How this helps the minority shareholders is that MTN Group got cash from the sale, which it can use to reinvest, pay down debt, or return value to shareholders through dividends or share buybacks.
How does the gain help investors?
Ideally, the market and investors, through this gain, see what MTN Uganda is actually worth based on real investor demand - not just accounting estimates.
In this case, if local investors or institutions bought MTN Uganda shares willingly at that price, it means they believed in the future earning potential of the company. MTN Group only sold 7.03 percent in the secondary offer, and selling a small portion at a premium shows confidence and unlocks shareholder value.
MTN Uganda was not immediately available for comment by press time.
For MTN Group, what began as a regulatory requirement became a masterclass in how to raise capital, build local goodwill, and revalue a business - all without losing control.
