MTN Nigerian shareholders stay in the dark as IPO approaches

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The minority shareholders of MTN Nigeria have complained about being kept in the dark by the MTN Group as the listing of the Nigerian unit fast approaches.
Some of the things they told BusinessDay in confidence are that they (MTN Nigerian minority shareholders) need to know how much of the shares MTN Group wants to sell in the Initial Public Offering (IPO) expected anytime from next month.
They also complained that MTN Group has not provided them more information on the IPO process(s) and that there is no clarity yet on the potential valuation of the proposed initial share sale.
MTN plans to list its Nigerian unit which BusinessDay estimates is worth between N3.2trn ($8.56 billion) and N3.9trn ($10.88 billion), by July – August on the Nigerian Stock Exchange (NSE), and may use part of the fresh funds raised to reduce debt.
MTN Group may sell at least 10 percent of its stake in its Nigerian subsidiary to pay preference shareholders, Reuters reported earlier in the year.
MTN Nigeria has around 402 million shares in issue, the same amount in preference shares, which it sold at $0.99 in 2007.
As part of the IPO it would split one share into 50 units, to create 20 billion shares, which would be listed on the bourse and set the IPO price via book building, according to a Pre- IPO presentation.
MTN Group has continued to make good progress with the preparations for the IPO and has been engaging with capital market regulators –the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE), sources tell BusinessDay.
The extensive engagement with regulators is on the structure and parameters of the listing.
“We don’t want to be kept in the dark in the whole process,” one of the minority shareholders of MTN Nigeria simply said last Friday.
MTN agreed to list the Nigerian unit on the Nigerian Stock Exchange as part of a June 2016 agreement to pay a $1 billion fine for missing a deadline to disconnect unregistered subscribers amid a security crackdown.
On June 10 2016, MTN Nigeria Communications Limited (MTN Nigeria) resolved the matter relating to the previously imposed regulatory fine with the Federal Government of Nigeria after the completion of an extensive negotiation process.
In terms of the settlement agreement, MTN Nigeria agreed to pay a total cash amount of N330 billion over three years (the equivalent of 25.1 billion rand) to the Federal Government as full and final settlement of the matter.
In show of commitment to move ahead with the 2018 target, the group recently appointed Chapel Hill Denham as lead manager for the initial public offering (IPO). Other appointed advisers are South Africa’s Rand Merchant Bank, Renaissance Capital and Vetiva Capital.
The telecoms firm is also working with Stanbic IBTC Capital, Standard Bank of South Africa, Standard Advisory London and Citigroup Global Markets, as joint advisors and global coordinators, with Stanbic acting as lead issuer.
One major impact from the listing of MTN Nigeria is that it will significantly dilute the dominance of the banking and cement sectors on the Nigerian bourse and give investors more options, which is good for the stock market, according to research analysts.
The listing of MTN on the Nigerian bourse makes the stock market become more reflective of the broader economy with the telecoms sector contributing about 10 percent to Nigeria’s GDP.
MTN Group said in a note preceding its financials for the year ended December 31, 2017 that “management has already initiated its Corporate Governance Rating Scoring with the NSE with a view to listing on the NSE’s Premium Board.”
The Premium Board of the NSE includes the likes of Dangote Cement Plc, Zenith Bank Plc, FBN Holdings Plc, Seplat Petroleum Development Company Plc, Access Bank Plc, Lafarge Africa Plc and United Bank for Africa Plc.
MTN Group reported improved results for the 12 months ended December 31, 2017, delivering on guidance communicated in March 2017 and returning to profitability in headline earnings.
For the Group, macro-economic conditions were challenging across a number of markets. For instance, Nigeria experienced a markedly weaker naira as well as hard currency liquidity challenges earlier last year, but this improved as the year progressed.
In constant currency, the Group service revenue in 2017 grew by 7.2percent, underpinned by 11.2percent growth in service revenue in Nigeria and a 3.9percent (on an organic basis) growth in service revenue in South Africa.
In 2017, MTN Nigeria subscribers base was 52.3 million; revenue increased by 11.4percent; data revenue increased by 86.6percent; digital revenue decreased by 3.5percent; Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) margin declined by 7.5 points to 38.9percent (excluding the impact of the regulatory fine); while capital expenditure (capex) increased by 38.2percent.
The MTN Group listed on the Johannesburg Stock Exchange (JSE), has a market capitalisation of $17.1 billion (R218.18 bn)