Airtel Uganda, a leading telecommunications company in the country, is preparing to initiate an Initial Public Offering (IPO) in which it will offer 20 percent of its issued shares, amounting to a total of eight billion units. The IPO is scheduled to take place between the end of this month and early October, signaling a significant development in the telecom industry.
The primary motivation behind this move is to fulfill a regulatory requirement imposed on Ugandan telecommunications firms, mandating them to divest a minimum of 20 percent of their ownership to local investors. The deadline for compliance with this regulation is set to expire in December of this year.
In an official statement, Airtel Uganda affirmed its intention to prioritize local investors during the share sale. However, it’s worth noting that historical precedent suggests a broader scope of investor participation. For instance, the IPO of MTN Uganda in 2021 saw involvement from various East African investors. This indicates that while the focus is on Ugandan investors, the offering might also attract interest from a wider regional audience.
In a recent investor presentation conducted a week before the IPO’s announcement, Airtel Uganda revealed its dividend policy, which aims to provide consistent returns for investors. The policy stipulates that the company will distribute a minimum of 95 percent of net or retained earnings to shareholders. This promising commitment is expected to foster confidence among potential investors.
“Airtel Uganda’s dividend policy will target a pay-out ratio of 95 percent of retained earnings or net profit after tax, whichever is higher, based on audited financial statements for the full financial year,” the company explained in its presentation. The company’s historical record indicates that an average of 95 percent of retained earnings has been distributed as dividends annually. For the fiscal year 2023, an estimated dividend of Ush514 billion (Sh19.9 billion) is projected to be paid out.
Drawing a parallel to the MTN Uganda IPO, it’s clear that regional investors have shown interest in such opportunities. Notable participants in MTN Uganda’s IPO included entities like the National Social Security Fund and the Central Bank of Kenya Pension Fund, as well as prominent investor Baloobhai Patel. In that offering, MTN made available 4.47 billion shares of its Ugandan subsidiary at a price of Sh6.2 each, achieving a respectable 64 percent subscription rate.
As Airtel Uganda gears up for its forthcoming IPO, industry observers and potential investors alike are closely watching this strategic move that aligns with regulatory guidelines and offers an avenue for ownership to the local population. The success of the IPO, alongside the fulfillment of dividend commitments, could significantly impact the company’s future trajectory in Uganda’s competitive telecom market.
Photo Source: Google
21st August 2023
Delino Gayweh
Serrari Financial Analyst
