How BTCL’s self-harm impacted its share price

Koobonye Ramokopelwa - Business Editor
Friday, 07 October 2016
How BTCL’s self-harm impacted its share price

When Botswana Telecommunications Corporation Limited floated shares at the domestic bourse some six months ago, we all punched the air with great excitement.

There were many feats worth celebrating. BTCL was the first government-owned company to go public. The company achieved this after successfully passing all the stringent regulatory processes subjected to listing corporations as well as privatisation hurdles, that entities such as Air Botswana had earlier failed to beat. Months down the line, we cannot raise Champagne glasses to celebrate the company, especially those who have spent their hard earned pennies on its shares.

A month or so after it joined the ‘Ivy League’ of Botswana’s companies, there were concerns coming from staff that, part of shares that were rightfully theirs somewhat ended in the ‘wrong’ hands during the listing process. That was not what staff at Megaleng House (BTCL headquarters) wanted. They felt wronged during the listing process, whose objective in part is to empower them (staff) and indeed the larger public who grabbed the company’s shares during the Initial Public Offer (IPO). In between public spat between staff and the listed company, a very interested party in the form of an investor, was keenly watching the events as they unfolded.

Technically speaking, or at least in the capital market language, off the market activities of listed companies normally affect share price in one-way or the other. This depends on whether they (activities) are negative or positive. Some will say it doesn’t always happen that way. However, history has proved otherwise in most cases. Soon as the standoff between BTCL staff and management started boiling over, its share price took a drastic fall, much to the chagrin of investors. We cannot entirely blame BTCL for the falling share price. Government, in this case PEEPA, which is the privatising agency, should have ensured that all knots are tied before the listing happens.

The soft-spoken PEEPA Chief Executive, Kgotla Ramaphane, it will seem, forgot to tighten some of the knots which are necessary prior to listing. Whichever way one looks at it, this is one event that should have been avoided at all costs. Any sound-minded investor does not like to be associated with a company, or institution that ‘cheats’ its employees, the biggest asset any company can have at any point in time. Put more bluntly, ‘bitter’ employees cannot be productive if they feel short-changed by the powers that be. If they don’t perform to expectations, profit will fall and so is dividend declared to shareholders. It is as simple as that.

This explains why BTCL shares are now trading 15thebe lower at 85thebe. This means, if you bought shares at P1 when the corporation was listed back in April, you now own only P0, 85. This is not good news to share at all, especially in these harsh economic times.
Then there is this other interesting event. For the year ended March 2016, the company, which is owned by more than 50, 000 shareholders of various types and sizes, reported a massive loss of P371million. Reason?  In a ‘sugar coated’ statement, the company said the loss was due to an impairment exercise. We cannot understand how PEEPA, BTCL board, advisors and management did not foresee this impairment exercise even before the listing prospectus could be made public. The fact that they have disclosed it in the prospectus is not a good justification for shareholders who bought the company shares for the first time.

No one in his right-mind would want to have any association with a company which posts a massive loss right from the start. This makes investors jittery and they start selling off shares, as they are not guaranteed of any positive return on investment, at least in the short to medium term. This kind of developments impact the share price of any quoted entity. This explains why the company share price is on a free fall. Soon after the results were made known, shareholders were told that the man who has turned the corner at BTLC, Paul Taylor, was leaving! This left investors at wits-end. We are told the Brit’s contract has expired. Taylor was appointed when BTCL was a parastatal, 100 percent owned by government. Contracts for CEOs at government companies last ten years at most. We cannot understand why the board, led by an exceptional lawyer, Daphne Matlakala, could not extend his contract, based on his experience and past performance.

It would have been good for Taylor to stay for some time to see the performance of the now listed entity. At a media briefing to announce the results at the plush Masa Centre, one journalist posed the question, why Taylor could not be allowed to stay a little longer. Matlakala answered that he has done his job, which he came here for, which was to transform the company. Obviously, shareholders were left wondering, how a Managing Director of a company was stepping aside three months after he prevailed on its historic listing. It does not happen that way. Under such circumstances, the market started losing confidence on its listed securities.

As if that was not enough, we read recently a company notice for an upcoming Annual General Meeting (AGM) that BTCL board chairperson, Matlakala will also be leaving this month. She is not seeking re-election as the BTCL Act and corporate governance permits. Matlakala has the right to leave. However, stockholders are dearly concerned about the timing of her departure. Matlakala, a well sought-after lawyer, is leaving the company at a time when it needs her most. She is quitting at a time when the entire company leadership is trying to adapt to life after listing. As the board chair, her voice of convincing shareholders to stay carries more weight.

At BTCL, the honeymoon has just ended. It is time to face reality and assure investors all will be well. Picture this: in a space of three months both the Chairman and Managing Director of the newly listed firm are stepping down. This leaves no one else but the investors in the lurch. They (investors) don’t know whether to stay or leave. Meantime, the share price is on a downward trajectory. In a related matter, Stockbrokers Botswana, which acted as a stockbroker for the company’s listing process, is under suspension from BSE after regulators questioned the fitness of its boss to hold office. This is a firm that played a role in the determination of BTCL shares pricing! We are now starting to wonder if BTCL share price was not overpriced? We are allowed to think so.

Just the other day, BTCL launched an integrated brand that seeks to integrate its mobile telecommunication company, beMOBILE and the mother company. The process to launch a single brand has been ongoing. We understand the value of integration as it saves resources. However, this begs the question, ‘How will beMOBILE compete pound for pound with giants like Orange and Mascom which all have well-established brands under the current setup? Was it not better to leave beMOBILE, which boasts a customer base of over half million, to stand on its own without being swallowed by BTCL? The brand was now becoming familiar with local customers. This is just a thought to ponder.

That aside, the fact is that BTCL, a company better known for ultra-profits prior to listing, is going under several developments which are not in anyway good for its share price. It will be great for shareholders to ask inquisitive questions at the AGM slated for later this month on the direction that BTCL is taking.  In turn, we expect the leadership to openly talk about the strategy the company is undertaking to reassure shareholders of the once revered telecoms giant. At BTCL, business is not as usual. At an event to launch the one BTCL brand, former Transport and Communications Minister, Tshenolo Mabeo assured attendants that the company share price would bounce back. However, at the rate at which events are unfolding at the Gaborone based company, we think otherwise.
*Koobonye Ramokopelwa is a Business Editor for Botswana Guardian

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