Vodacom Tanzania Begins IPO as MD Sees Acquisitions, Mergers

(Bloomberg) -- Vodacom Group Ltd.'s Tanzanian unit will begin an initial public offering on Thursday, the first in a series of listings expected on the domestic exchange that may spur mergers and acquisitions, Managing Director Ian Ferrao said.

The company plans to raise 476 billion shillings ($213 million) in an offering of 560 million shares at 850 shillings each, according to a prospectus issued to brokers on Tuesday and confirmed by Ferrao. It expects to list on the Dar es Salaam Stock Exchange on May 16.

Tanzania in June enacted a law requiring phone companies to sell at least 25 percent of their businesses to the public to boost local ownership. The industry has more than quadrupled its subscriber base over the past decade to more than 40 million users, according to the industry regulator. Vodacom Tanzania competes with eight companies including Millicom International Cellular SA's Tigo, Bharti Airtel Ltd.'s domestic subsidiary and Halotel, a unit of Vietnam's Viettel Group.

By going public, transparency will improve as companies will be required to publish their financial statements, Ferrao said in an interview.

The listings “will hopefully open up those opportunities by seeing where the pressure points are and where the opportunities are,” he said by phone. “And hopefully open up the conversation for fair-value transactions, which may end up resulting in consolidation.”

Growth Scope

There's scope for growth in Tanzania, where the industry regulator estimates mobile penetration at 80 percent of the population, said Ferrao. That compares with 87 percent in neighboring Kenya, East Africa's biggest economy, and more than 100 percent in South Africa, the continent's most industrialized nation. Vodacom Tanzania's market share is about 31 percent, the country's biggest, according to Ferrao.

“There is subscriber growth left in the market,” Ferrao said. “Data will continue to accelerate as more customers continue to adopt data services and get connected to the internet.”

The company plans to introduce new products using its mobile-money M-Pesa product, including merchant payment platforms, and data offerings such as a partnership with Lusaka, Zambia-based pan-African pay-TV company Kwese TV to distribute content through Vodacom.

To contact the reporter on this story: Omar Mohammed in Dar es Salaam at omohammed4@bloomberg.net.

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Liezel Hill