Wednesday, June 3, 2020

When Mascom lists, the local telecom game will switch up

BY TLOTLO LEMMENYANE

The headline the next day read, “Botswana in pioneering privatisation issue.”

It was the morning of Wednesday 16th December 2015, a day after Public Enterprises Evaluation and Privatisation Agency (PEEPA) published a notice that it had valued Botswana Telecommunications Corporation Limited (BTCL) at P800 million with its shares split into 800 million units valued at P1 each.

That day, and the months that followed, a cavalcade of Batswana scrambled to raise money to invest in the country’s booming telecommunications industry. The countdown to April 8, 2016 when BTCL publicly listed on the local bourse stands out as not only a historic milestone, but also one of thoseflashbulb memories in Botswana’s collective psyche. Almost every BTCL stock emptor still remember how they ran around to raise the money. Some cleaned up their personal savings; others sold their cattle while many borrowed from the banks. The details are seared into their memories.

As the bellwether of Botswana parastatals’ privatisation and the country’s mobile telecommunications public offering, the BTCL listing was imbued with extra meaning.

Three years later, the BTCL watershed moment could pale into just another red letter day on their calendar when Mascom is unleashed to the public later this year. BTCL made history as the largest Initial Public Offering (IPO) on BSE but that status seems likely to be usurped by its more successful competitor.

Strive Masiyiwa, Zimbabwean billionaire, is about to assume a dominant stake in Mascom and has began rallying Batswana entrepreneurs to join him; so that they too can become shareholders of this company as plans are underway to have it listed on the local bourse by October. “Buy shares in Mascom” he wrote on his Facebook page, adding “In what I hope will be the biggest public listing ever undertaken in Botswana, I want to sell shares to anyone who can raise about P100 (about $10).” Subject to regulatory approvals the Mascom IPO is a very much alive prospect. Barely sufficient details are known to date regarding the Mascom listing. Outside of the listing itself, important details like how much of the 60 percent stake Masiyiwa will leave to himself and how much he will offload to prospective buyers as well as the price of a single share to mention but a few. The company’s prospectus when completed will reveal the answers to the pending questions. Masiyiwa said that he intends to positively discriminate the shares towards young Batswana entrepreneurs, most of whom follow him on his facebook page.

The story of Mascom, or rather of the man behind it, is one that will be told for many years to come. In 1998 Masiyiwa stamped his blueprint to Mascom by ascribing it a name from the first three letters of surname and simply added com from communications. After a successful bid process to the government of Botswana to set up this company called Mascom, such is how its journey began. For the past 21 years of Mascom’s operations it flourished into a local telecom giant. It also exchanged a few hands in those years, with its formative days traced to a partnership with Portugal Telecom. When Portugal Telecom disinvested from Africa, MTN waltzed in to take its place. Additionally, some local Batswana shareholders bowed out after making their millions and their stake was scoped up by government pension fund for civil servants, Botswana Public Officers Pension Fund (BPOPF). The short end of this tale is that now MTN too is bowing out and its stake will fall into the hands of the founder of Mascom, Masiyiwa.

Last month on April 20 Masiyiwa publicly announced on his Facebook page that he taking back what has always been his. He also wrote that he never stopped being a shareholder of Mascom at any time. It would appear, according to this post that Masiyiwa and MTN entered into a deal after MTN took over from Portugal Telecom that MTN would assume the stake but on condition that Masiyiwa would in future buy them out when he has the financial muscle to do so. What Masiyiwa describes is that his acquisition of a controlling stake in Mascom is simply to honor an agreement that was earlier inked.

With Mascom’s likelihood of listing the local telecoms industry could be in for renewed dynamism. One obvious change is that BTCL will no longer be the only telecom company on the local bourse and because of its first mover advantage it provides a viable comparator of the plausible path Mascom will chart as a publicly listed company. Worth noting however that BTCL is is not living up to its billing as indicated by its lackluster performance on BSE. Three years since its epochal listing the BTCL share price has seen more trough days than peaks. According to the BSE market report of the recently ended week the BTCL share price traded at P0.90, P0.10 less than its listing price of P1.00. The postulated dynamism Mascom may introduce into the telecom space under its new identity is incited by what backs Masiyiwa as the new boss in town.

Behind Masiyiwa is a company called Liquid Telecom, the leading independent data, voice and IP provider in Eastern and Central and Southern Africa. It supplies fibre optic, satellite and international carrier services to Africa’s largest mobile network operators, ISPs and businesses of all sizes. Liquid Telecom’s customers are listed as Airtel Africa, MTN, Orange, Tigo, and Vodafone, as well as its own sister company Econet Wireless. Liquid Telecom is a subsidiary of Econet Global, to which Masiyiwa is its Founder and Chairman. What Masiyiwa has injected into Mascom is a solid backing of telecom infrastructure through Liquid Telecom. One assumes that as Chairman Masiyiwa has a casting vote which is available to him to use to set the tone and direction of Mascom’s future path. He wrote on his facebook page that a year ago he ordered the management of Liquid Zimbabwe to install free Wi-Fi at every single one of the country’s 48 colleges and universities. That is a man who flexes his influence to get things done, and the same could be imagined for Mascom. Mascom may not need to invest in further infrastructure because it could draw in the advantage of Liquid Telecom. Through Liquid Telecom Masiyiwa has strapped on a bullish undertaking to re-engineer the telecoms space, particularly in a continent that has historically being starved of technological advancements.

In comparison BTCL could be considered a miniature version of what Mascom may likely become. BTCL does not possess telecommunications infrastructure that can put it on an equal footing with what Mascom will bring to the game. BTCL was stripped of the telecom infrastructure when government set up Botswana Fibre Networks (BoFiNet) to be the custodian of such infrastructure. In that sense BTCL became BoFiNet’s customer like other companies who buy the capacity of the infrastructure to sell to end users (consumers). A local broking firm, Motswedi Securities, has highlighted that with BTCL buying from BoFiNet, it translates in BoFiNet determining the margins available to network operators. “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,” wrote the broking firm.

What could be considered another sticking point for BTCL is that the government of Botswana is the dominant shareholder in BTCL with a 51 percent stake. While it is not peculiar for government to have a controlling stake in a company, it’s worth noting that government does business differently from a purely corporate entity. The controlling stake by government gives it power and influence to sway BTCL’s future. Whereas a corporate entity owes shareholders explanations on the dealings of the company, government on the other hand considers the interests of the different groups it serves. For example, telecommunications is regarded a utility necessary for effective human interaction and as a right deserving to all individuals regardless of social standing. Government in that sense is duty bound to provide access to all but with BTCL also competing in the aggressive telecom space government would need to do that in tow with maintaining the company’s profitability. Unlike BTCL, a corporate entity is not saddled with the task of striking a delicate balance across the different interest groups as government does. What this suggests is that BTCL may lack the flexibility and dynamism Mascom could bring.

The listing of Mascom also plays into the narrative of the pursuit of equality, particularly relating to the fact that Batswana will have the opportunity to buy a stake into it. Although the trickle down effect of wealth is not as simple as economic theories describe it to be, the distribution of wealth in such ways as shares acquisition is a welcome development. There are economists who opine that reality is different from the ideal of wealth creation. They argue it is especially so because one would have to accumulate a significant share for it to exert considerable and true influence; but  that is not to negate that buying shares could be the stepping stone to greater wealth pursuits. For some Batswana, Mascom could be the starting point.

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