Highlights:
Date » Tuesday, 19 March 2019: Stock Prices (TZS) ACA » 6,100 CRDB » 125 DCB » 340 DSE » 1,260 EABL » 4,660 JHL » 9,300 KA » 135 KCB » 1,020 MBP » 490 MCB » 500 MKCB » 800 MUCOBA » 400 NICO » 165 NMB » 2,340 NMG » 1,360 PAL » 470 SWALA » 425 SWISSPORT » 2,000 TBL » 11,400 TCC » 17,000 TICL » 385 TCCL » 600 TOL » 660 TPCC » 2,020 TTP » 120 USL » 10 VODA » 800
VODACOM RECOMMENDATIONS
Preamble
One of the largest (top-three) mobile network operators (MNOs), namely MIC (T) Limited (Tigo), is currently facing a legal challenge relating to the shareholding and ownership of the company. In February 2017, Tanzania’s Capital Markets and Securities Authority (CMSA) suspended the planned IPO of MIC Tanzania Limited (Tigo), pending resolution of the shareholders’ dispute, resulting in delay its intended listing on the bourse. Another large (top-three) player, Airtel Tanzania Ltd (Airtel), is currently in dispute with the Government over a controversial transfer of state-owned Tanzania Telecommunications Company Limited (TTCL) shares and ownership of the company to Celtel Tanzania (now Airtel Tanzania Ltd). Through the state-owned TTCL, the government has laid claim over and is pushing to retake the ownership of the Airtel Tanzania Ltd. Moreover, earlier this month, the Tanzania Communications Regulatory Authority (TCRA) threatened to penalize telecom companies (including Tigo and Airtel) that have not completed the process of listing their shares at the Dar es Salaam Stock Exchange (DSE).
Our take
The above developments together with the fact that the third top-three MNO is already listed on the Exchange, indicate limited or no likelihood of a major consolidation in the immediate future (3 – 5 years). This conclusion is also backed by the fact that fast-growing Halotel might not be interested in a consolidation at present for two reasons: (i) it is largely a Vietnamese government enterprise that has sufficient financial muscle and a seemingly working strategy, and (ii) it will be more interested/opportune to cash in on the on-going misfortunes of the larger players.
Competition
On the side of competition, as at September 2017 Vodacom had the largest share in Tanzania’s market (32%), followed by Tigo (27.6%), Airtel (26.4%) and Halotel (9.4%). In comparison to FY2016, Viettel Tanzania Limited (Halotel) the fastest growing mobile operator saw its subscription rising by approximately 21.7% while Vodacom’s grew by 4.1%, Airtel’s by 0.7% and Tigo’s declined by 8%. Halotel’s commitment, growth and strategic plans of injecting about $100 million (about TZS 223 billion) in network and services to rekindle competition for data and voice communication among operators in the industry could intensify competition in the medium to long-run.
Further, the introduction of Mobile Number Portability (MNP) back in March 2017, could also lead to a more intense competition among telecom companies. MNP which is available to both Post-Paid and Pre-Paid customers provides flexibility to mobile subscribers to change service providers or services without changing their telephone numbers. MNP may not necessarily affect the market shares or cause pricing competition, but ii could lead to a disastrous effect if and when competitors start fighting price wars. MNP is a tool which could further strengthen competition leading to improvement of quality of service and stimulate innovations.
Notwithstanding the above, we expect Vodacom to remain at the top for the foreseeable future. The Industry in general is expected to grow, driven by mobile money and data service, which implies that demand for telecom products is expected to remain strong. For the Voda price, we expect an unch situation in the medium term, hence our hold recommendation on the Vodacom stock.