There is plenty of excitement on Broad street. With just a few days to the anticipated Initial Public Offering (IPO) of Africa’s largest telecommunications company, MTN Group, in Nigeria’s capital market, the investment climate is already charged as potential investors and regulators begin to weigh its promises for their investment earnings and overall deepening of the capital base of the gradually recovering Nigeria Stock Exchange (NSE).

Globally, credible brands’ entry into any nation’s capital market is usually an investment elixir as millions of investors, especially those that share in the corporate philosophies and value-addition offerings of such entities’ products and services, are usually there to stake their money on such stocks.

Whenever this happens, the multiplier effects of such investment always invariably manifest in the macro-economy in terms of the total capitalization and stock structures of such bourses and the larger economy.

But then, whether the excitement among investing public and regulators’ steady but cautious moves to list the telecommunication company’s proposed IPO in the capital market will become a reality as projected next month or not is a major issue pundits are debating now given the not-too-clear commitment by the telecommunication company and the industry’s ‘guardians’.

Indeed, figures obtained from the Securities and Exchange Commission (SEC), the apex regulatory body for the NSE showed that since 1999, Nigeria’s market has raised just N319 billion through Initial Public Offers, IPO. Initial public offers are often issued by small or start-up companies seeking capital to expand, but they can also be done by large private entities who want to become publicly traded entities. Whichever way it is a cheap source of getting equity funding for businesses.

In the proposed capitalization adventure, MTN Group is planning to raise about $500 million from the sale of shares in its Nigerian business during the first half of the year to fulfill the terms of a deal struck to settle a fine imposed by the Federal Government through the Nigerian Communications Commission (NCC).

Specifically, the telecoms operator is set to list the Nigerian unit in fulfillment of a June 2016 government’s $1 billion fine imposed on it for missing a deadline to disconnect unregistered subscribers amid a security crackdown.

The penalty, originally set at $5.2 billion, led to the resignation of the company’s then chief executive officer, Sifiso Dabengwa, a first ever full-year loss and a slump in the share price that’s yet to be clawed back.

Although, MTN spokesman, Funso Aina, declined to comment on the issue but rather maintained that the company agreed to the Nigeria listing in June as part of a $1 billion fine.

According to MTN’s financial statements, MTN Nigeria has 52 million subscribers and generated 36 billion rand ($3 billion) of revenue in 2017, posting earnings before interest, taxes, depreciation and amortization of 14 billion rand for the period.

Rob Shuter, the Chief Executive Officer, MTN said in an interview with a foreign media recently that he expected the IPO to be finalized by the end of the year.

He further disclosed that progress was being made on the Nigerian listing plan and should market conditions be okay, it could be concluded by the end of this year.

With anticipation over the years, it is expected that the firm’s listing which is long overdue, is a good development for the market as it would help deepen the market once the listing takes place.

Mike Uzor, an investment analyst with Findata Services Limited, while analyzing recent trends of IPOs in the Nigerian Stock Exchange (NSE) noted that there had been no record of any IPOs by private companies in the last two years.

recalled that years 2007 and 2008 were very active IPO years in the stock market as the two year period hallmarked the era bullish run in the market. Even though the total amount raised at the time was just under N200 billion, the number of companies that approached the market for IPOs was much more than it was in recent years.

With MTN’s plan, Uzor is optimistic that the IPO market will boom again after close to four year’s lull which lasted until 2015 with just N125 billion raised through IPOs in the bourse.

During the lull, Seplat and Transcorp Hotels Plc were the two major companies that raised money by IPOs.

Another analyst with Equity Standard, Charles Bestway, in an interview with Business Eye said that MTN Group was only offering 30 percent of its Nigerian unit.

He pointed out that getting listed is doubtlessly an avenue to access additional funds but that this might be an avenue for the South Africa-based multinational mobile telecommunications company to exit the country with ease, just like the case of Etisalat after it defaulted on loans.

According to him, “holding on to 70 percent communicates the desire to hold on to control (of the Nigerian arm) for a very long time.”

Indeed, it is quite possibly that if the company even maintains 70 percent stake doesn’t guarantee that the group won’t leave the country.

According to a recent analysis, both Kinnevik and Naspers had a combined 84.9 percent stake in Konga but this didn’t stop them from leaving.

Whatever happens with the impending public offering would forever portray the reality of the Nigerian market to multinationals and domestic corporations.

To this end, Nigerian shareholders see it as a big plus to the nation’s economic growth; but are concerned about whether or not the telco would actualise its plan and when.

Speaking on the proposed MTN’s IPO in the capital market, Muktar Muktar, Chairman, Shareholders Trustees Association of Nigeria, said that there would be changes in the operations of the company, noting that the telco’s operations could be slower as bureaucracy would be at play.

The industry expert explained that with the fact that the telco would be listing only 30 percent of its stock, MTN Nigeria can no longer make autonomous decisions as the boards of directors of publicly traded companies are not under the influence of the management.

“The nature of being public means that you post your quarterly financial reports,” Muktar says. He further adds that investors will put a lot of expectations on the quarterly reports.

“They will avoid taking big bets that could affect profitability in the short run because all investors want to see is consistent, smooth, and gradual profit growth every quarter,” he stressed.

On going public, Gbenga Idowu, the National Coordinator, Shareholders United Front said MTN Nigeria would want to work harder on maintaining a good public perception of the company.

If not currently in place, this may be an avenue for MTN Nigeria to offer employees stock ownership as an additional benefit to its staff. Having an ownership interest in the company could result in more productivity on the part of the employees.

Idowu projected that MTN Nigeria’s IPO would increase the NSE’s market value, which will in turn have an effect on the nation’s economy, adding that the telco’s precedent “could also end up becoming the standard for multinational companies in the country to have a certain percentage of their stocks on the NSE.

MTN Nigeria listing could also provide an opportunity for the Nigerian government to raise its tax revenue base. The tax authority gets 10 percent withholding tax on dividends paid, and there is also a charge on commissions and fees paid to stockbrokers for the sales and purchase of stocks.

The analyst explained that companies looking forward to going public would closely watch how the public accepts MTN Nigeria’s IPO. And the best part is that the outcome of the impending IPO would determine whether other telcos would follow suit or not.”

The listing would also support wealth creation and distribution as Nigerians become shareholders of a telecom company with the largest market share.

Nonetheless, indications from stock market regulator, the NSE, stockbrokers, shareholders and other key market participants established that the share sale of MTN Nigeria is possible between June and July this year.

Commenting on the proposed plan, Fakrogha Charles is a stockbroker, is a dealer and chief relationship officer with Foresight Securities and Investment Limited. He cautioned that investors should be sensitive to the stock market condition especially at this crucial time MTN is approaching the market with IPO.

According to him, time of raising funds on the stock market is very important since it will have an impact on the results that could be realized.
He stressed that investors will look for tangible reasons to put their money into a company.

“Money is scarce and investors are always careful where they put their money. So the performance of a bank will be a key factor. It is very important because it will determine how they gain,” he said.

But the doyen of stockbrokers in Nigeria, Sam Ndata, described the multinational company’s plans to raise capital from the bourse as better for the stock market growth.

He said stock markets, over the years, have been playing a critical role in enabling businesses to raise capital to expand and grow their businesses but that this basic function had been vitiated since the global financial crisis, as markets look less promising since then.

Ndata said: “They are expected to be the most significant source for companies to raise fresh funds (business capital), allow businesses to be publicly quoted – to raise additional financial capital for expansion by selling shares of ownership of the company in a public market.

“The liquidity that an exchange or stock market provides affords various investors the ability to swiftly and without difficulty sell securities”, he added.

Meanwhile, the Securities and Exchange Commission (SEC) has confirmed it was in discussions with MTN Group on the company’s planned $500 million initial public offering (IPO), bringing to a close speculations that the telecoms company was yet to make a move on listing its shares on the Nigerian Stock Exchange (NSE).

A senior official of SEC, who pleaded not to named in print, said that MTN had commenced discussions with the commission on the IPO.

The source said that although talks were ongoing, the company was yet to formally file its application for the IPO. He said the commission was committed to investors’ protection, and that their interest would be protected in the ongoing discussion.

The source said that the commission would remain committed to the development of the nation’s capital market and the listing of more multinationals.

Business Eye reliably gathered that the NSE had not yet received an official filing from the company.

Based on data analysis of past IPO in the market by Business Eye, if successful, the Lagos share sale will be the biggest on the Nigerian Stock Exchange after Starcomms Plc, which raised $796 million when it listed in 2008.

MTN posted a loss in 2016 as it absorbed the financial impact of the fine but reported its return to profit last year. As a result, most of the shares will be sold to local institutions and individuals, though foreign investors could be brought in to ensure the process is a success.

The Company, in furtherance of its proposed recapitalization, has already picked several banks and brokers including, Renaissance Capital, FirstRand Ltd., Rand Merchant Bank and Nigerian company Chapel Hill Denham to work with Citigroup Inc. and Standard Bank Group Limited who are the global coordinators for the deal. However, in order to strengthen the deal, the telecommunication company is set to bring in indigenous banks into the deal.

Business Eye findings indicate that following the announcement by MTN Group on its plan to appoint more banks for the sale of shares in its Nigerian units, its management has been discussing with some Nigeria banks on the deal’s financing matters.

It was gathered that the management of the company met some interested bankers recently and also held a presentation for foreign and local analysts in Lagos to give them more details about the deal and MTN Nigeria’s financial position.

A version of this article appears in print on Business Eye Magazine, Volume 11 Edition 5, May 2018

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