BTCL IPO: What kind of an elephant is it?

Measured by either the anticipated capital or the prospect of high profile suitors believed to be chasing the equity, Botswana Telecommunications Corporation Limited (BTCL) floatation will arguably be the most attractive in history.

The well-diversified telecommunication outfit is the only quasi-government entity that has made inroads in becoming a public company and the ‘gloating’ over potentially the ‘largest float’ is not surprising. The Initial Public Offer (IPO) and BTCL transformation have been a long, bumpy and axle snapping journey but, finally a moonlight is glimmering at the end of the privatisation tunnel. A team of experts has completed the prospectus – a document that interprets a company’s value - paving way for suitors to approach the counter and acquire BTCL shares.

Ever since Bechuanaland took over the running of postal and telegraphs system from Union of South Africa in 1957, communication has always been central to government. The company has grown in leaps and bounds from 5 000 direct access lines in 1975 to an asset base exceeding P3 billion in 2012. Government will retain a lion’s share in BTCL and allow institutional investors, individuals and BTCL employees to scramble for the remaining 49 percent, in what IPO-watchers say will make the company one of the largest on the domestic board.

Succeeding where others have failed
An IPO had been tipped for August 2014 and thereafter shares were supposed to be listed on Botswana Stock Exchange (BSE) but real reasons for the delay have not entered the public domain. Observers link the delay to failure to release financial statements in time, an accusation BTCL spokesperson, Golekanye Molapisi flatly denies. The new financial structure will reflect BTCL assets, including those of Be Mobile, the State-owned trailblazer in the cutthroat mobile telephony business. The Project Team led by officials from Ministry of  Transport and Communications, Ministry of Finance, BTCL and the Public Enterprise Evaluation and Privatisation Agency (PEEPA) braved criticism and stereotypes associated with privatising a parastatal in Botswana and took the first baby steps to ensure that the prospectus is delivered to BSE late December last year.

This is an inaugural effort in the midst of the confusion and excitement. If history is a guide, BTCL is succeeding where others have failed. The national airliner could not take off as parliament and Cabinet clipped its privatisation wing. The same fate befell the National Development Bank (NDB). The BTCL confusion is understandable as it involves several stakeholders, according to those closer to the high profile transaction. A member of the Project Team quipped recently: “PEEPA and the Ministry of Transport and Communications are complicating privatisation. It is difficult… it is driven by outsiders.”

‘Let’s wait and see’
Former Air Botswana and PEEPA CEO, Joshua Galeforolwe has not been excited about BTCL privatisation. For someone with extensive exposure in government’s attempts to privatise parastatals, his cynicism is not misplaced. He was at the helm of Air Botswana when the executive and legislative arm of government exchanged jabs in a bitter fight over privatisation. Perhaps drawing from previous blunders, he believes that it is not easy to guarantee efficiency and profitability of a parastatal. Both NDB and Air Botswana are loss-making entities and Galeforolwe is given to a belief that in the long run parastatals fail to deliver attractive rates of return on investment. But BTCL is not your run-off-the-mill parastatal.

Under the watchful eye of Thapelo Lippe, BTC became the first parastatal to record super-normal profit, with total revenue bulking up to P836 million in 2009, up by 4.6 percent when compared to the previous period. As if this was not enough, three years later, BTCL revenue leapt to P1.19 billion at a time when companies were struggling to find a footing in the midst of a global economic slump. Other beleaguered CEOs hung their heads in shame every year-end when Lippe and later Paul Taylor tossed champagne to celebrate impressive financial results.

On the other hand it did not come as a surprise when newly appointed Botswana Development Corporation MD Bashi Gaetsaloe blamed the liquidation of Fengyue Glass Manufacturing company for a dampened 2013 financial year and urged his team to review BDC shortcomings and challenges. This gloom is common among many parastatals in Botswana, especially Air Botswana and Botswana Meat Commission. Galeforolwe prefers to adopt a wait-and-see approach to BTCL privatisation. “I am yet to see how different it is compared to previous ones. It will be important to see the nature of the transaction once the prospectus is out.”

Taylor’s house not in order
BTCL may be a money spinning investment that delivers returns on investment with impressive EBITAD, but poor corporate governance weighs down the parastatal. A former CEO resigned in 2001 under a cloud of controversy. Olebile Gaborone later claimed in an interview with Mmegi that politics played a major role in his expulsion. Insiders hold a different view and accuse him of embezzlement. Gaborone has denied the accusation and immediately defected from the Botswana Democratic Party to join Botswana National Front the same month of his resignation. As if that was not enough, four Board members resigned a week later complaining that they were not consulted when Gaborone was sucked.

As Taylor and the Project Team press ahead with privatising BTCL, murmurs remain at Megaleng House. It is clear that BTCL house is not in order. Management and the union are still at loggerheads over several “pending issues” according to union leadership who did not want to be identified. “We want to have a better understanding on the allocation of shares under the Employee Share Option Plan and whether that will be in line with the stock exchange regulations.” The unionist suspects that the delay is aimed at helping highly placed investors to accumulate enough wealth to gobble BTCL shares.

“Key people are the ones who have the financial muscle the delays could be from them wanting to prepare themselves well to have a stake. At the same time the BTC union is arguing that there should be proper control in the allotment.” BTCL has not been the most transparent and corrupt free company. In 2014, the telecom giant parried accusations of favouritism after a South African events management company, Creative Caterpillars allegedly withdrew a P15 million tender without consultation.

Caterpillars was shortlisted for a marketing tender but was surprised when BTCL invited other companies to submit tender documents. It was not the first time BTCL was involved in a marketing tender row. Local marketing companies complained in 2009 after BTC awarded a South African firm, Inter-Brand-Sampson a tender under dubious circumstances. Former BTC CEO, Vincent Seretse won a controversial case in which he was accused of abuse of office and maladministration. The case was thrown out as a result of lack of evidence.

Directors in copper cable theft
Insiders say ending corruption at BTCL requires uprooting some corrupt directors allegedly involved in cable theft because their friends front for them in companies that provide maintenance. Normally, say the insiders, the directors and senior managers allegedly engage unemployed young men to vandalise and steal copper cables. “It is difficult to uproot this problem and it costs BTC millions of Pula,” said a source.

Salaries mistakenly increased
Some within BTC are taking advantage of the privatisation and restructuring. In November 2014, seven managers had their salaries “mistakenly increased.” BTC public relations manager admitted the mistake and said they will correct it. This is a clear sign of negligence, corruption and nepotism, said the insider.

Likely gobblers of BTCL cake

Satar Dada
Dada is the ruling Botswana Democratic Party Treasurer and is connected to Khama’s lawyer, Parks Tafa of Collins Newman and Company. He is reported to have held “significant” shareholding in Vista and later Orange Botswana. Sources say he sold part of his shares at an undisclosed amount sometime in 2009. He is reportedly eyeing BTCL shares but is believed to hold minority shares at Orange Botswana. He said; “I have not seen the prospectus as yet. One has to study it when it comes out and will see how to go about it. With the delay, it is a good idea as it gives people time to prepare themselves.” Collins Newman & Co says in its website that it has done advisory work in the privatisation of BTC and the formation of Bofinet. Senior partner at Collins Newman, Rizwan Desai is lead legal advisor in the BTCL IPO.

Charles Tibone
It is not clear when the former Minister of Transport and Communications sold his shares at Orange Botswana. He is also believed to be eyeing BTCL shares. When contacted, he said he cannot comment until he sees what is on the table. “I would only say much if I knew more about the company, its true value and what I would be buying. It is best to know if it is an elephant with complete legs or it has just two legs. As an investor, you need to have much details, as of now I don’t have much except for what I hear in the media.”

Joshua Galefolorwe
Former PEEPA CEO is also said to be interested in buying shares in BTCL. “Let’s wait for the prospectus,” he said when asked if he is interested.

Parks Tafa
Collins Newman became the obvious legal advisors at an unspecified amount. However, Senior partner at the go to corporate law firm disclosed his utmost interest to buy some stake in the much awaited IPO, but he told BG that, “unfortunately I cannot do so because we are the ones doing the IPO. That will be a conflict of interest.”

Telecoms movers and shakers
THARI PHEKO - Botswana Communications Regulatory Authority (BOCRA) chief executive officer Outgoing BOCRA chief executive Pheko has been with BOCRA from its inception as Botswana Telecommunication Authority (BTA). He took over from Moses Lekaukau and as a regulator, he is key to BTCL privatisation.

LEONARD MAKWINJA – former BTC chairman
Has been chairman for the past 10 years and is conversant with telecommunications industry.

RIZWAN DESAI
Collins Newman and Company is the go to law firm for corporate and business leaders. And the truth is Harvard trained lawyer and senior partner at Collins Newman and Company, Rizwan Desai is the brains behind the corporate law firm. He has the expertise and gravitas for corporate law. He provides counsel to several blue chip companies and has been overseeing IPOs. His firm has provided legal counsel to BTC for several years now. He understands the telecommunications industry as his law-firm also provides counsel to Mascom, a competitor to Be Mobile.

MARTIN MAKGATLE
Managing Director of Motswedi Securities has played a key role in securities market in Botswana. He has over the years played a key role in participating in IPOs and has been in the financial services industry for many years. He worked for Investec financial services before. Investec Plc is listed in LSE and Johannesburg Stock Exchanges. Some suitors will reach out to him before approaching the counter for BTCL shares.

THAPELO LIPPE – Former BTC CEO
He is said to have initiated the idea of privatising BTC. He worked for Microsoft Kenya before joining BTC and had extensive experience in the telecommunications and technology sector. He was expelled in 2007 under a cloud of controversy. He was a threat to a board of directors that appeared to tolerate corruption and conflict of interest. He expelled and suspended several senior managers for various cases of conflict of interest. He had directed his focus to Board members implicated in corruption. Many serious prospective investors will ask Lippe for advice if they plan to buy BTCL shares.