MTN, Airtel and Lycamobile are expected to float their shares on Uganda’s stock exchange in the near future.

This will be the first time telecom companies are floating on the stock exchange. The listing of shares, the government argues, is to ensure improved transparency in public financial reporting standards as well as preventing capital flight.

The three telecom companies, which have received the National Telecommunication Operator (NTO) licence from Uganda Communications Communication (UCC), are expected to float 20% of their shares on the Uganda Securities Exchange (USE).

Two of Uganda’s top six taxpayers are telecom firms, contributing over sh600b to the treasury every year. The telecom firms also remit in excess of $250m (sh900b) to their head offices annually for onward transmission to their global shareholders, according to UCC.

But will the listing by the telecom companies boost the USE that is characterised by few local listings and low liquidity.

Uganda’s 24 year-old stock market has a membership of 17 companies, with nine of them locally listed while eight are cross listed.

William Nyakatura, a financial advisor, says the listing of the telecom firms will most likely drive interest in Uganda’s stock market from regional and foreign investors.

“Just like we saw with Umeme, people bought not only Umeme shares but also Stanbic and dfcu shares so that shows off the country as a potential point of investment,” he notes.

However, Mr Aeko Ongodia, the chief executive officer of Xeno investment management, a technology company, is pessimistic about the impact of the telecom firms on the USE.

“The stock price performance of the currently listed companies has been flat over the years, although the underlying businesses themselves have performed well and consistently paid dividends to investors. None of them has put on amazing growth in share price to excite investors, especially retail investors,” he notes.

“Therefore, there is very little expectation for such companies to reward investors with phenomenal capital growth, rather most of the reward will come through a consistent dividend which in some cases does not match the return on risk-free debt instruments issued by the government,” he adds.

The chief executive officer of Capital Markets Authority (CMA), Keith Kalyegira, is aware of the challenges faced by USE. CMA is the statutory body responsible for regulating and promoting the development of capital markets in Uganda.

According to the Capital Markets Authority (CMA), report 2019/20, the USE total market capitalisation, which means the total value of companies at the exchange, fell by 15.7 per cent to Shs19.09 trillion at the end of the review period from Shs22.66 trillion at the close of 2018/19. This drop is mainly attributed to the decrease in the share prices of all the cross-listed counters.

Kalyegira says the listing of telecoms on USE will be influenced by several variables, such as the vibrancy of the market conditions, the readiness of investors to invest in the telecom shares, and the complexity and size of the transaction.

“In order to make sure that they don’t all come at the same time, we want to encourage them to have about nine months from one listing and the other as we learn lessons because the companies big,” Kalyegira says.

“We need to make sure there is sufficient adoption capacity in terms of savings. If they all come at the same time, there might be a risk of under subscription. We want to make sure there is sufficient timing in between to allow some of the investors to reorganise themselves and financing before participating in a second large listing,” he adds.

CMA is also undertaking initiatives to increase local company participation at the stock market.

“We have a programme implemented by financial sector deepening Uganda with support from the European Union that will raise awareness among local companies around market based financing such as listing, private equity and corporate bonds. Many companies think it is complicated and it is our job to make them realise it is not,” Kalyegira says.