MTN’S SECOND BITE AT THE CHERRY

Last week telecom giant, MTN offered seven percent of its shares to the public. The shares on offer, were shares first offered to the public in December 2021, that were not taken up and which they are under regulatory obligation to sell by December.

"In the company’s much awaited Initial Public offer (IPO) in December 2021, MTN offered 20 percent of itself to the public but only 65 percent of the offer was snapped up. It came as a great shock, as lesser companies have been oversubscribed in previous offers...

Industry players today think a repeat is unlikely.

At the end of 2021 the global economy was only just finding its feet after the Covid-19 lockdown. In addition, in a bid to beat back inflation interest rates had risen in western economies and monies had fled our shores to go back home.

The selling of shares to the public by MTN was a condition of the renewal of the license, it is arguable that given a choice, given the economic situation of the time, even MTN may have wanted to hold off a little. They did not and the IPO fell short.

Since then though, trading in MTN shares have provided a boost to the Uganda Securities Exchange (USE) and even if the share trading at sh170 before suspension of activity on the bourse to allow this new offer, is lower than the effective IPO price of sh180 from two years ago, consistent dividend payments, thrice a year have more than made up for that slight dip in price fortunes.

This time around the sentiment in the economy is markedly improved and MTN CEO Sylvia Mulinge is confident that a repeat of the IPO debacle will not happen this time around.

“We have been transparent about our progression of growth since we listed and we are confident we will get some real engagement. The appetite is there,” she told a news conference last week.

The company has thrown in a sweetener, with every 140 shares bought, buyers will be entitled to an additional 30 shares. With the share selling at its market price of sh170, the effective price of the shares on offer is then sh140, an 18 percent discount.

"In theory if trading reopens at sh170 every shareholder will see an immediate sh30 a share gain...

As if that is not enough all shareholders will be eligible for the sh6.4 per share dividend that will be paid out on 25^th June.

As a short term play the benefits are obvious.

For the investors, who intend to hold the share for the long haul, they too will not be left out.

The company last year paid a total dividend of sh18 a share, a 13 percent return on their money, better than the average fixed deposit rates in this town and higher than the yield on the 364-day treasury bill, which at last week’s auction was 11.926 percent.   

The final dividend for 2023 is a 13 percent improvement from the previous year’s dividend of sh15.9 a share and expectations are that this trend will continue.

While the share price has barely moved over the last 12 months, growing three percent, investment experts are confident that this is a temporary situation.

"They base their thinking on – among other things, on the company’s continued growth in profitability, averaging about 16 percent over the last five years, a figure they say was affected by the Covid pandemic. Last year net profit grew 21 percent....

They expect this to continue with the increasing subscriptions to the network – in May the company logged its 20 millionth subscriber and recorded a growing up take of data services – subscriber numbers jumped 22 percent to 8.2 million.

While mobile money has been growing by leaps and bounds – subscribers were up 10 percent to 12.1 million in 2023 and transaction volume had jumped to sh133trillion from sh92.3trillion the previous year, in 2025 it is set to be spun off from the telecom.

“MTN Uganda intends that all existing shareholders will continue to benefit from the company’s financial technology and infrastructure businesses, whether in the form of listed or unlisted interests and irrespective of any potential restructuring that may be undertaken,” a company statement.

The growing importance of the mobile money arms of the telecos, splitting the entities was part of the renewal of the contract.

"MTN Mobile money had sh1.5trillion in deposits, which would have made it the eighth largest financial institution in Uganda by customer deposits.  Deposits grew 23 percent to sh1.5trilion from sh1.2trillion in 2022, assuming this rate of growth is maintained MTN’s mobile money army would have matched Stanbic bank’s current sh6.3trillion in deposits by 2030...

Whichever way the restructuring goes existing shareholders stand to gain.

With millions of Ugandans yet to acquire mobile phones or log onto the internet or access mobile money services, MTN with its lead in market share in all segments has to be given serious consideration by investors.