Telecom Companies Set For Mandatory Listing At The Dar Es Salaam Stock Exchange Beginning January 2017
- Geared to ensure more transparency in telecom companies finances
- Help government to implement tax measures
- move could prove detrimental to potential investors after 1st July, 2016
The lucrative telecommunication industry is set to witness new measures invoked by the Government of the United Republic of Tanzania (‘the Government’) that require them to list their shares on the stock exchange market by January 2017. This move is intended to enhance local ownership of the telecommunication companies by ensuring that twenty five percent shareholding is owned by the public throughout the life span of the telecom license (Section 26(1)(a) of the Electronic and Postal Communications Act, 2010 (‘EPOCA’). On the other hand; listing of telecommunication companies in Tanzania aims at enhancing transparency in financial accounting and ultimately facilitate revenue accountability.
The Law Reform Process
The Government through the Finance Act, 2016 introduced amendments to the EPOCA requiring telecommunication companies to list their shares to the stock exchange market. Speaking in Parliament during deliberations on the Finance Bill, 2016, the Minister for Finance Dr. Philip Mpango expressed the government’s intention to propose amendments to the Electronic and Postal Communications Act No.3 of 2010, henceforth referred to as EPOCA, stating that “existing mobile phone firms will be duty-bound to list their shares on the stock market in a period of six months”. The Minister went on to say that “companies registered in the country after July 2016 will have to list on the stock market after two years of operating in the country”. The EPOCA under section 26(3) states that phone companies currently operating in Tanzania must “within three years from the commencement of this Act, and in accordance with requirements of the Capital Market and Securities Act, be required to offer shares to the public and subsequently list with the stock exchange”. Newly registered companies, however, would be required to “offer shares to the public and subsequently list with the Stock Exchange in accordance with the requirement of the Capital Markets and Securities Act within three years from the date of grant of the licence” as stipulated under section 26(4) of the EPOCA.
Taking this into consideration, telecom companies were initially supposed to list in 2013 (being three years after the commencement of the Act) but the deadline was extended to 2015 to ensure better implementation. We at Breakthrough Attorneys therefore believe that the intended amendment of the Act referred to by the Minister, targets section 26(3) and (4) which will now require existing phone companies to list themselves come January 2017 while phone companies registered after 1st July 2016 will be given a two year window and not three as stated in the Act.
Public Opinion on the Legislative Changes
This move by the Government has attracted both criticism and approval from various stakeholders including varying opinions from lawmakers. Key among critics include investors such as Egypt-based TA Telecom, a company that offers telecom operators, brands and NGOs a wide range of mobile managed value added services which intends to enter the Tanzanian market. Amr Shady, founder and CEO of TA Telecom voiced his concern at the move calling it “extreme” and “a step in the wrong direction”. His views were echoed by former chairperson of the Dar es Salaam Stock Exchange Mr. Peter Machunde who felt that mandatory listing would discourage potential long-term investors. Phone companies have also been at the forefront of criticism aimed at the expected proposal, with the Mobile Operators Association of Tanzania noting that listing shares at the stock exchange was a way of raising funds and therefore begging the question, ‘why list if companies do not need to raise funds?’.
Among those expressing their satisfaction at the intended move is the Tanzania Stock Brokers Association which believes that the Mobile Operators Association of Tanzania are only concerned about their finances becoming more transparent. Lawmakers are of mixed views with chairperson of the Parliamentary Budget Committee Honourable Hawa Ghasia observing that there was a need to rethink the January 2017 deadline in order to avoid implementation challenges.
The Race to Listing as the Deadline looms
In a bid to abide by the set deadline, we have now witnessed MIC Tanzania Limited (popularly known as ‘Tigo’) striving to go public. The process has now begun whereby the name has already been changed to MIC Tanzania Plc. Processes to have Initial Public Offer have also begun. In the same way Vodacom Tanzania Limited and Airtel have also began the process. We are uncertain whether this process shall be completed within the set deadline by the amendments made pursuant to the Finance Act, 2016. Other telecom companies such as Smart, Viettel, and Zantel seem to have not started the listing process as required by the law. There is likelihood for telecom companies seeking for further extension of time from the Government to enable them do the listing of their shares to the stock exchange market as per the requirements made under the Finance Act, 2016.
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