Wanted: A phased approach to telecom listing in Tanzania

By Venance Mwihechi

When National Assembly Speaker Mussa Azzan Zungu asked the Tanzania Communications Regulatory Authority and the Capital Markets and Securities Authority to explain to Parliament why telecommunications companies have not listed on the Dar es Salaam Stock Exchange (DSE), he brought a long-running policy question into focus.

Under the Electronic and Postal Communications Act, existing telecommunications licensees were required to offer shares to the public and subsequently list on the stock exchange, while operators licensed subsequently were given three years from the grant of their licence to do the same. Only one mobile operator has so far complied.

The parliamentary scrutiny is understandable because a stronger presence of major telecommunications companies on the DSE would deepen Tanzania’s capital market, widen domestic participation in a strategically important sector and bring major operators within the stronger disclosure and governance disciplines associated with public ownership. The objective should therefore remain to expand public ownership and transparency in the sector, while implementing the listing requirement in a way that the capital market can support.

The more immediate question is how to get there, because a successful listing requires preparation, investor demand, market capacity and careful sequencing. Requiring several large telecommunications operators to undertake IPOs within a short period would place significant demands on domestic investor liquidity and would need to be considered alongside the financing needs of other sectors. The practical challenge is therefore how to advance the listing agenda without placing unnecessary pressure on the capital market.

There is a practical precedent for this approach, however. Tanzania’s Banking and Financial Institutions (Disclosures) Regulations, 2014 already require banks and financial institutions to publish quarterly financial statements, while annual financial statements are subject to audit and publication requirements. This provides a workable model for telecommunications operators that have yet to list. International telecoms regulation offers a further precedent.

In the United Kingdom, Ofcom requires certain operators with significant market power to maintain and publish regulatory financial statements, giving the regulator and other stakeholders greater visibility into the economics of regulated markets and the basis for regulatory decisions.

Quarterly publication would give government, investors and the wider public a more consistent view of the financial position of operators while the listing process is phased. It would also create a common baseline across the sector, so companies operating with the same public resource and within the same regulatory environment face broadly comparable disclosure expectations.

That would advance part of the original policy rationale behind the listing requirement itself. The debate over telecom listings has long involved questions about the visibility of operators’ financial performance, tax contributions and costs. Comparable financial disclosure would give policymakers better information for assessing the economics of the sector and considering whether the combination of taxes, levies and other regulatory costs is compatible with continued investment.

That question is significant because Tanzania’s connectivity ambitions require sustained private investment. The National ICT Infrastructure Masterplan envisages 50 per cent of infrastructure financing coming through public-private partnerships and other private-sector investment, alongside contributions from UCSAF, government allocations and development finance institutions. The telecommunications sector therefore needs a policy environment in which operators can continue to invest in network expansion, while government has sufficient information to assess whether the regulatory and tax framework supports that investment.

Transparency also has a legitimate public-interest dimension because telecommunications companies use scarce national resources, including radio spectrum and numbering resources. Spectrum is a finite national resource, and international regulatory practice places considerable emphasis on transparent allocation, licensing conditions and accountability in its use. That provides a basis for public visibility into the economic relationship between operators and the state, including licence payments, taxes, investment commitments, coverage obligations and other conditions attached to the use of public resources.

Quarterly financial reports in line with the Banking and Financial Institutions (Disclosures) Regulations (2014), alongside appropriate operational and sector metrics, would provide considerably greater transparency and metrics for sector sustainability, without imposing quarterly external audits, and harmonising disclosure requirements.

Tanzania can pursue three objectives at the same time. It can retain listing as the medium to long-term route to wider public ownership and deeper capital-market participation. It can introduce a common quarterly disclosure standard for operators that remain unlisted. And it can sequence listings according to market conditions, allowing the DSE to absorb new offerings without placing unnecessary pressure on domestic liquidity.

It would demonstrate that the state is serious about the principle behind the requirement while recognising that implementation needs to reflect the capital market’s capacity. This approach keeps the listing requirement intact while providing a practical route to greater transparency in the interim.

Tanzania is entering the implementation phase of Vision 2050, which places digital transformation and productive infrastructure among the pillars of a more diversified and competitive economy. Telecommunications infrastructure is a significant foundation on which that ambition rests. Achieving that ambition will require policy decisions grounded in a clearer understanding of how the telecommunications sector generates revenues, bears regulatory costs and finances network investment. Greater financial transparency can help provide that evidence.

The DSE should remain the destination for broader public ownership. Transparency can begin now, while the market prepares for the listings that follow.

The author is a Senior Fellow in public finance and infrastructure economics based in Dar es Salaam. He writes in an academic and policy-advisory capacity on capital market development, infrastructure sustainability, and public-private partnerships in East Africa