Is MTN Public Share Offering a Good Buy?

By: Livingstone Mukasa

Ever since it became apparent that MTN Uganda was going to list on the Uganda
Stock Exchange I have been bombarded with calls to advise if it’s a good buy. Today
I got my hand on the MTN Share Offering Prospectus and I immediately went to work
on it. You see, I have a small community of people that consider me their “People’s
Professor” and it’s a responsibility I don’t take lightly. Over the years I have made the
right calls investing in Uganda Clays offering, Stanbic Bank and Safaricom but sitting
out CIPLA. From the word go I want to state that I am not a licensed investment advisor
and therefore I am not responsible for the way you use the information shared below.

Key Considerations.

1. It's not a growth offering. The company is not raising money to grow its business
rather to pay its shareholders. As an entrepreneur I don’t generally like these
kinds of deals where I am a replacement for someone who has already made
their money.

2. The earnings per share averages 16% per year over the last 5 years. With a
dividend policy of not paying more than 60% of Profits after tax, it translates into
a 9.6% in profits against revenue. Not exciting considering the trouble the
company must go through to earn that revenue.

3. MTN routinely outsources major/critical functions like masts and infrastructure

provision and maintenance. This poses a risk of cost overruns/adjustments that
are not beneficial to local ownership.

4. Taking Mobile Money Financial Services (Mobile Money) off the table means
that they have taken the fat out of the meat. It’s interesting to see that the
information about Mobile Money business is liberally included in the prospectus
but the business is not.

5. The Convoluted nature of MTN ownership makes me a little bit uncomfortable.

Even if I am a minority shareholder, I like to know the people I am doing business
with. MTN Ownership structure involves 4 companies (as in one company owns
the other) before you get to MTN Uganda Limited. In that case it’s hard to know
who calls the real shorts. This has tremendous implications in business because
without knowing who they are, they become hard to influence.

6. Revenue growth over the last 5 years for Data and Voice has been slow and
it’s likely to decline especially for Voice. Value extraction from revenue is also
low for a technology led company. It expects Revenue of UGX 2.065 Trillion in
2021 but only 325 Billion in Net Profit after Tax. This is 15.7% of Revenue and only
9.4% may be declared as dividend.

7. The proceeds from the sale of UGX 895 Billion (if all shares are subscribed) will
go to the selling shareholders and not to pay down debt or expand the
Is MTN Public Share Offering a Good Buy?
business. Yet the company is sitting on some serious debt of about UGX 612
Billion. In this regard MTN Uganda is a highly leveraged operation and one that
has serious ongoing interest payments to make. It’s interesting to note that the
Lion share of the debt is either originated or Consortium-led by South African
Banks operating in Uganda.

8. In the prospectus MTN says it cannot guarantee a dividend payout every year
and states in the prospectus, a risk of a capital call (asking you to invest more
money) in the future.

If you decide to buy MTN Shares nonetheless, please avoid the following:

a) Don’t borrow money to buy MTN shares.

b) Don’t sell your assets to invest in MTN shares

c) Invest what you can afford to lose or wait out for a long period of time.

d) If you have never bought shares in public offerings, invest some money for learning
purposes and not to earn a fortune.

About the Author: Livingstone Mukasa, a Financial Advisor, Entrepreneur, People’s

Professor of Streetnomics and the Author of “The Great Financial Rebuild” & “Investing
for the Future” Contact +256772459167 email: livinbusiness@gmail.com