Hey folks! So, here’s the scoop. Last week, Airtel Uganda, the second-biggest telecom company in the country, had a bit of a rough time with their initial public offering (IPO). They were hoping to sell a bunch of shares to the public, but it turns out not many people were interested. Bummer, right?
The IPO, which closed on October 27, 2023, was a big deal for Uganda. They were offering a whopping 8 billion shares at 100 shillings each, which would have valued the company at a cool Shs 4 trillion. But guess what? The response was lukewarm at best. By October 26, only 3.2 billion shares had been subscribed by the public. Ouch!
But wait, there’s more! In a last-minute move, the National Social Security Fund (NSSF) swooped in and saved the day. They bought a whopping 4.8 billion shares, which is 50% of the IPO stock and 10% of the company’s total equity. NSSF is a fancy-sounding organization that takes care of retirement savings for private sector employees in Uganda. They’ve got over 2.5 million members and assets worth over 15 trillion shillings. They decided to invest in Airtel Uganda because they believe in the company’s financial performance and growth prospects. Plus, they’re hoping to make some sweet dividend income and capital appreciation. Smart move, NSSF!
Now, let’s talk about Airtel Uganda. They’re actually a subsidiary of Airtel Africa, a big shot in the mobile services game across 14 African countries. Airtel Uganda has been doing its thing for over 25 years and they’ve got a whopping 14.3 million active subscribers. That’s a lot of people! In fact, they account for 47.3% of the market share. Impressive, right?
In 2024, Airtel Uganda reported some pretty impressive numbers. They raked in 1.6 trillion shillings in revenues, had an EBITDA of 888 billion shillings, and a net income of 326 billion shillings. Not too shabby! And get this, they’ve got the fastest and most comprehensive 4G network in the country, covering over 90% of the population. Talk about staying connected!
But even with all these impressive stats, Airtel Uganda had a tough time attracting investors to their IPO. Why, you ask? Well, it seems like the investment climate in Uganda wasn’t exactly ideal. They were dealing with high inflation, sky-high interest rates, low domestic savings, a weak capital market, and political uncertainty. Yikes!
Inflation in Uganda was averaging 3.5% in FY23, but it shot up to a whopping 10.7% in October 2022. That’s a big jump! And don’t even get me started on the interest rates. They were through the roof! The central bank’s policy rate was at 10% for most of FY23, and commercial bank lending rates were averaging over 20%. Ouch!
And get this, domestic savings were pretty low at around 13% of GDP, compared to the regional average of 17%. Not great, huh? And to top it all off, the capital markets in Uganda are still developing. There are only 18 listed companies and trading volumes on the Uganda Securities Exchange (USE) are pretty low. Not exactly a thriving market.
Oh, and let’s not forget about the political uncertainty. There’s a general election scheduled for February 2024, and that may have scared off some investors. Who wants to commit their funds to long-term investments when there’s political drama going on?
So, there you have it. Airtel Uganda’s IPO didn’t go as planned, but hey, at least they had NSSF to save the day. And who knows, maybe things will turn around for them in the future. Fingers crossed!