More Africa NewsAirtel hopes to raise $200m, following partial IPO on Uganda Stock Exchange

August 30, 2023by myles0

At 100 Ugandan shillings per share, Airtel’s offer is more competitive than that made by MTN Uganda when it went public in 2021. But it will take more to convince investors and succeed a subscription rate of at least 100% .

Airtel Uganda, a key player in Uganda’s dynamic telecommunications universe, recently made an announcement that has sparked the interest of financial insiders: each share offered for sale in its initial public offering (IPO) will be offered at the price of 100 Ugandan shillings. The move aims to mobilize up to 800 billion Ugandan shillings (approximately US$216.4 million) from this strategic operation. This figure has not failed to attract the attention of investors and market analysts, who see this as an opportunity not to be missed.

Positioned second in the Ugandan telecommunications market, Airtel Uganda presents promising growth prospects, given an analysis of the financial context.

The major challenge of this IPO lay in the search for a subtle balance: determining the intrinsic value of the company while offering individual Ugandan investors the opportunity to engage. In comparison, the market saw in December 2021 the IPO of the local subsidiary of MTN, which was only able to raise 64.7% of the targeted resources, but with a value per share of 200 Ugandan shillings.

Airtel Uganda’s initial offer, which is half that of MTN, presents more attractive prospects. However, market observers are sure to scrutinize other crucial parameters. Competition with MTN and the telecommunications sector of the Uganda Stock Exchange will be intense. According to data analyzed by the Ecofin Agency and based on 2021 financial reports, MTN has generated a dividend offering a return of 6.7% for investors, which exceeds the market rate of return which stands at 4, 4%.

The consensus among investors active in the Ugandan financial market anticipates growth in the dividend per share paid by MTN Uganda over the next two years, as well as an increase within the telecommunications sector. To successfully list, Airtel Uganda will have to embrace this trend and offer even more attractive dividends.

It is important to remember that the opening of the capital of Airtel Uganda to the stock market is in accordance with the telecom regulations put in place by the Ugandan government in 2018. This regulation requires that any telecom operator wishing to operate on the national territory introduce 20% of its capital on the local stock exchange within two years of obtaining its operating license. Airtel, having obtained its national telecoms license in December 2020 for 74.6 million US dollars, was supposed to be in good standing, no later than December 15, 2022.

In sum, the opportunity presented by the IPO of Airtel Uganda cannot be underestimated. It emanates from its strong market position, its growth potential and its commitment to delivering competitive dividends to investors. However, the path to a successful IPO is paved with challenges, which the company will need to overcome by aligning with current trends and offering benefits that will captivate investors seeking long-term growth.

Source: Agence Ecofin

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