Is MTN Zambia Reluctant to List on LuSE?

For some time, Financial Insight has been mulling at the prospects of an IPO (initial public offering) on the Lusaka Securities Exchange.  One name that often pops up is that of MTN Zambia. Aside from Airtel which is currently listed, MTN Zambia is the natural choice for a second mobile company IPO on LuSE. We won’t bring in Zamtel as they have concerns of their own and an IPO is the last thing on their mind.

The case could not be strong as we have observed the parent company, MTN Africa, list in a number of countries across Africa. However, listing has not been without its perils. Nigeria is currently a huge concern for the group as they have faced action from regulators and the central bank over non-conformance (Sim card debacle) and “illegal” repatriations of capital (allegations MTN denies). On the latter though, the tone has soften from the Nigerian Central bank which saw the company’s shares rise the most in more than six months after the change in stance regarding the illegally transferred $8.1 billion out of the country.

Accordingly to Bloomberg, there are suggestions that there may be a way for the MTN to make a deal with Nigerian authorities in manner that is analogous to have the group negotiated down a $5.2 billion fine. The fine was reduced to $1 billion and the company had to make a commitment to list its local business in Lagos.

Uncouth as the tactics may sound, they had the resulting effect of getting the Nigeria outfit listed and allowing for participation of locals. Due to the group’s aggressive expansion program across Africa, it is not hard to notice that MTN has become a juggernaut. With regulatory burdens beginning to consume the behemoth both local and abroad, its tight hold of its geographical spread across 23 nations is be to be threatened. So much so that local listing in national jurisdictions could be the answer to reduce this pressure.

In Zambia, one would sense they have only just done enough. They are currently the leader in mobile provision, over taking Airtel which fell asleep at the wheel and required a revamp of its technology that inevitably led to the price war of December 2017. However, Nick Hedley of the Sunday Times (23 Sep 2018, Business Times) indicates that these regulatory pressures coupled with falling voice revenues has had MTN mulling a potential merger with Telkom South Africa. If Telkom enjoys any form of regulatory holiday, by acquisition or merger, this would mean some of MTNs woes may be addressed.

Although there have been no echoes of MTN purchasing part (or all) of Zamtel’s operations, we observe nuances along the lines of local listing that MTN may want to consider. A local listing would not only give MTN an opportunity to allow for participation of local enterprise in Zambia but also win kudos from Government for “Keeping it Zambia”!

In addition, an IPO would be a really cool way for the company to raise capital on the local front. According to Nick, “with revenues under pressure across the sector and regulatory burdens growing, analysts and industry insiders are now convinced that consolidation in the industry is inevitable”.

Consolidation would mean few players in the telco market. With echoes of Vodacom Zambia having its own fish to fry and the entrance of 4th mobile player, consolidation is inevitable. However, the twist that may exist is whether any of the unlisted players decides to list.

MTN Zambia has a good case to list. Not only would they raise capital that is independent from the woes of the parent company, they may just win more hearts of Zambian local and institutional investors. The choice is theirs to make.

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