Airtel Uganda’s initial public offering (IPO) has failed to generate the expected excitement and interest among investors in the local stock market. This underwhelming response can be attributed to subpar marketing efforts and concerns about the exclusion of the company’s mobile money services from the IPO.
The IPO, which was initially delayed for a year due to economic challenges faced by the telecommunications firm, was launched on August 30.
As per new regulations in the telecommunications industry, all telecom companies are required to list on the Uganda Securities Exchange (USE) to ensure that citizens have a share of the industry’s profits after years of revenue growth.
Airtel Uganda secured a new operating license from the Uganda Communications Commission (UCC) in 2021, valued at $70 million. In comparison, MTN Uganda paid $100 million for a new 12-year operating license in October 2020 and issued ordinary shares worth Ush895 billion ($239 million) during the Covid-19 lockdown.
MTN Uganda’s shares were sold at Ush200 ($0.05) each, and its IPO was undersubscribed by 40 percent, with shares listed on the USE in December 2021. Airtel Uganda’s shares, on the other hand, are being offered at Ush100 ($0.02) each, with eight billion ordinary shares available for sale, equivalent to 20 percent of the company’s issued shares, resulting in a total IPO value of Ush800 billion ($213.7 million).
The offer period is set to expire on October 13, and the listing of the shares on the USE is scheduled for October 31. Despite these details, the IPO has not gained significant traction in the market.
Analysts are cautiously optimistic about the short-term performance of Airtel Uganda’s shares after listing. A valuation report by UAP-Old Mutual Financial Services Uganda has a “buy” recommendation, projecting a share price of Ush110.61 ($0.029) over a 12-month period and an expected two-year normalised earnings cumulative average growth rate of 11.64 percent.
Additionally, it anticipates a price earnings ratio of 8.44, a speculative half-year dividend for 2024 estimated at Ush8.5 ($0.002) per share, and a projected dividend yield of 13 percent.
However, the limited activity in trading at the USE and modest share price movements in recent weeks, along with the reluctance of retail investors to sell their existing shares to buy Airtel Uganda stock, indicate a lack of enthusiasm for the IPO.
Some investors are discouraged by the exclusion of Airtel’s mobile money business from the listed portfolio.
While it is common for most IPO transactions to pick up momentum in the final two weeks of the offer period, the Airtel IPO appears to have achieved less than five percent uptake compared to the MTN IPO, which gained more significant attention just two weeks after its launch.