History is made not merely by the events that take place but by the response people give to events that take place. One such event that propelled the country into excitement in the past few months is the ongoing privatisation of Botswana Telecommunications Corporation Limited (BTCL). In less than a week BTCL will stop taking offers for its shares and in a little over a month the shares are expected to be listed on the Botswana Stock Exchange (BSE).
Since the announcement of the BTCL initial public offering (IPO) in late December, analysts and experts have shared insights with regard to whether or not BTCL shares are an investment worth buying into. The general assessment of BTCL shares, as espoused by various experts, is that BTCL presents significant potential to grow in the future and as such Batswana were advised to buy its shares. Growth is expected to come from its unique position in the market as the only fixed and mobile network operator which therefore affords it the opportunity to offer products and services that make use of both its fixed and mobile capabilities. With its worth rubber stamped by analysts among other things it was not surprising to observe a growing interest by Batswana to be part of this grand milestone.
Giving an update towards the final week of the offer period last week Friday, BTCL Managing Director Paul Taylor proclaimed that at no point did they have less than 500 people per day submitting their offers at the Barclays branches. He also said they are expecting a spike in numbers as the listing comes to a close. The offer period opened on January 11th 2016 and is expected to close on March 4th 2016. Based on Taylor’s submission numbers it could be estimated that in the past seven weeks of the offer period, excluding weekends, a minimum of about 20 000 Batswana have submitted their offers. Against the share application forms of over 320 000 that were printed and a minimum of 20 000 that have been submitted, this seems to be far below the target.
When BTCL finally lists on the local bourse six weeks from now, a new tune will set in motion. BTCL will have the task of proving that it can mimic the profitability that it has enjoyed in the past five years and carry it forward into the future. Experts assert that profitability is a measure people use as a critical assessment of a company’s financial health. In putting their money into BTCL investors did so with the expectation that the good financial health BTCL currently demonstrates will be replicated into the future. It would be remiss, in that regard, to not point out the risks BTCL will face in defending its profitability. Given the transfer of its telecommunications infrastructure to Botswana Fibre Networks Limited (BoFinet) a few years ago it meant that BTCL like other network operators sources its connectivity from Bofinet at prices that it determines.
BTCL is said to be sensitive to prices that Bofinet charges, and according to Motswedi Securities this is because BoFinet determines the margins available to network operators and in some cases BTCL may not be able to pass on to the retailer any margin compression enforced by BoFinet and this will eat on margins and profitability. Taylor is however confident that BTCL will retain its profitability disclosing that it has been able to secure a fixed position in terms of prices from Bofinet. He explained that BTCL has signed a ten year indefeasible right of use with Bofinet which means that its future cost base is known and predictable.
