Entry of multinational firms to boost nation’s capital market liquidity

There have been, over the years, growing calls for multinationals in the telecommunications, oil and gas sectors to list on the nation’s bourse, as a strategic step towards deepening the market and engendering active participation of indigenous investors in the companies’ wealth creation agenda.

Economists have argued that entry of big corporations in such niche sectors of the Nigerian economy, on the exchange’s list will significantly raise capitalisation of the stock market, currently estimated at slightly above N10 trillion.

However, sectorial analysis of the market shows that the telecommunication sector is under-represented. Even more disheartening is the fact that none of the major national telecom company’s shares are 
traded on the Nigerian Stock Exchange (NSE).
Indeed, the NSE, since 2012 , has come up with initiatives that will compel multinational firms to list on the Exchange.

Specifically, the listing rules of the exchange had been reviewed to make it easier for these companies to access the Nigerian capital market and eventually list their shares.

NSE had also provided a legislation that covers incentives, unbundling of stringent eligibility requirements that create high barriers for potential entrants and hinder participation by willing businesses, adopting of options that promote foreign investment in the economy under terms that support national interest without exposing the market to the dangers of the past.

Surprisingly, expectations by some financial analysts that the peaceful polls witnessed in the country in the month of May would spur economic activities which would stimulate the nation’s stock market turned a mirage, as investors’ wealth depreciated by N102 trillion in eight months.

Specifically, market capitalization of quoted equities which opened the year at N11, 237 trillion as at January 5, 2015 now stand at N10, 208 trillion as at Monday, August 31, down by 3.5 per cent in 8 months, while the All-share index slides by 4258.45 points or 14.3 per cent from 33,943.29 to 29,684.84.

Interestingly, hopes returned to the NSE last week with the pronouncement by the Exchange that MTN Nigeria is planning to become a Public Liability Company (Plc) in 2016 by listing its shares on the floor of the NSE by way of public offer.
Also, Arik Air, one of the largest Nigerian- owned airlines, plans to list by May 2016 as part of its management’s efforts to boost capital base and acquire even more aircraft.

There is no gainsaying the fact that listings of these telecom and aviation giants would shore up the liquidity of Nigerian capital market, which will in turn restore the much-needed investors’ confidence.

For instance, MTN has close to 50 per cent of the subscriber-market in Nigeria. But its dominance is way deeper than that. Investigations revealed that MTN has more than 80 per cent of the revenues of all telecommunications companies in Nigeria.
It recently reported worldwide profit of $6 billion in 18 countries of operation of which roughly half of it comes from its Nigerian operation .
Also, 98 per cent of MTN Nigeria’s workforce is Nigerian.
in line with MTN’s robust local content policy.

MTN MD, Michael Ikpoki

MTN Nigeria contributes about five percent of the nation’s GDP, with about 5000 employees in an emerging market where the lifespan of most businesses is five years. Revenue also increased from N793.6 billion in 2013 to N824.80 billion as at December 31, 2014, just as its subscriber base rose to 59.9 million , retaining the top spot in the 21 countries where the group operates.

In 2013, the Nigerian Communications Commission (NCC), the telecoms industry regulator, studied six markets in the Nigerian telecoms sector, and declared MTN as a dominant operator in one of the markets studied, precisely the mobile voice market, based on its 44 per cent market share on mobile voice alone.
The NCC also declared MTN and Globacom as joint dominant operators in the upstream segment market that has to do with wholesale lease lines and transmission capacity, because MTN and Globacom jointly controlled 62 per cent of the public terrestrial infrastructure.

Since inception in 2001, MTNN has led the growth in the voice market to become the biggest mobile operator in Nigeria and West Africa. It is now pursuing new growth opportunities in the data and ICT space. This lead position is evident in a differentiated and attractive array of product and service offerings, as well as a growing bouquet of ICT products.
With 15 service centres, 144 Connect Stores and 247 Connect Points located in every state of the federation, MTN is poised to lead the delivery of a bold, new digital world to the Nigerian market.

The company has been on a consistent growth trajectory since inception.
On February 9, 2001, the company secured one of four available licenses to operate digital GSM (Global System for Mobile Telecommunications) telephony from the Nigerian Communications Commission (NCC). A licence fee of US$285 million was paid for an initial 15 year period, allowing MTN Nigeria to provide and operate a 900 and 1800 MHz second-generation digital mobile service within Nigeria.
MTN Nigeria made the first call on its network on May 16, 2001. On March 19, 2007, MTN were also granted a 3G licence from the NCC, and later made a payment of $150 million before commencing 3G services in the same year.

It has consistently placed a high premium on network quality, customer service and value-added services which truly enrich customers’ lives since it commenced operations in August 2001.

As a pioneer and leader in the industry, MTN has also recorded several notable firsts, which have positioned its operations and activities as a point of reference for the telecoms industry and the business community in Nigeria and Africa.

As one of the major players in Nigeria’s GSM revolution, MTN Nigeria was also the first to launch its service across major Nigerian cities, and currently has the most expansive network coverage, spread across 3,340 cities, towns and villages in all 36 states of the federation, including the Federal Capital Territory (FCT).

On February 10, 2003 MTN became the first mobile company in Nigeria to record one million active subscribers on its network.
In 2007, MTN became the first Nigerian company to pay for a 3.5G license and also the first to launch the service.
In 2013, MTN became the first telecom operator to build a record 10, 000 base transceiver stations (BTS) in Nigeria.
The company’s awareness of the need to promote environmental and Corporate Social Responsibility has also led to the establishment of the MTN Foundation, through which it invests in sustainable projects spanning the education, economic empowerment and health sectors, which have a high impact on the quality of life in communities across Nigeria.

To date MTN Foundation had invested over N10, 000, 000, 000.00(ten billion naira) in projects in 338 project sites in the 36 states of Nigeria and the FCT.

MTN’s leadership position in the area of network investment, coverage, expansion and state of the art infrastructure is also evident – with more than $12 billion invested to date in fixed assets and facilities nationwide and an additional $3 billion investment to be ploughed into the network by the end of 2015.

As a result of these massive investments, MTN Nigeria now has the most expansive network coverage, spread across 3,340 cities, towns and villages in all 36 states of the Federation, including the Federal Capital Territory (FCT).
MTN also provides network coverage to 89.24per cent of Nigeria’s land mass, while over 86.46per cent of the population have access to our services.

On January 20, 2003, MTN commissioned the 1st phase of its digital microwave transmission backbone, Y’elloBahnâ on January 20, 2003.
Constructed at an initial cost of $120million, the first phase of Y’elloBahnâ spanned 3, 500 kilometres. The 2nd phase of Y’elloBahnâ which started in July 2003 extended the Y’elloBahnâ project to cover a total of 4,500 kilometres.
The length of the entire digital microwave transmission backbone currently stands at 11, 400km.

This interconnects with Cameroun in Borno and Cross rivers states and with Niger Republic in Sokoto State.
In terms of distance and capacity, this makes the Y’elloBahnâ Africa’s most extensive digital transmission infrastructure and it has significantly contributed to enhancing call quality on MTN’s network.

In addition, MTN also embarked on the deployment of fibre optic cables across the country to boost the transmission capacity on our network.
This massive project has so far been executed in eight phases, and as at October 2013, a total of 11,500 kilometres had been covered with fibre-optic cables across Nigeria.
This makes it the longest privately owned fibre-optic cable ever laid in Africa and definitely one of the most modern.

In 2010, MTN Nigeria, in partnership with Ericsson,commissioned the largest network switch centre in the world, capable of handling calls from up to eight million subscribers at a time.
This year, the company was awarded the prestigious Investors in People (IIP) Gold certification by the governing board of the UK-based organisation.

The Gold certification followed an earlier accreditation of MTN Nigeria as an Investor in People organization in 2013 – the first company in West Africa to receive such recognition.

The Managing Director of the company, Michael Ikposi, in a recent interview explained that MTN became a dominant operator in mobile voice and wholesale lease lines and transmission capacity, through hard work and aggressive marketing strategy, coupled with the advantage it got for taking a bold step to operate in the Nigerian telecoms market since 2001, when other operators feared to invest initially.

Similarly, Arik Air , West Africa’s leading airline operating a domestic, regional and international flight network. Arik holds a comfortable leading position in the domestic market where it deploys about 80per cent of its capacity giving it a market share of seats of 56 per cent, offering about 68,000 one-way seats per week.

Arik’s biggest domestic routes are between Lagos and the capital, Abuja offering about 17,700 seats per week across 53 times weekly services,  followed by Lagos-Port Harcourt offering about 13,600 seats. Abuja-Port Harcourt is the third largest route with about 5,600 seats.

Arik operates 61per cent of its international capacity, or about 10,500 seats to eight regional destinations in Western Africa including five to the west; Dakar, Banjul, Freetown, Monrovia and Accra as well as to Douala, Kinshasa and Luanda to the east and south.

Lagos to Accra accounts for about 4,000 weekly seats, making it Arik’s biggest international route ahead of Lagos-London, 3,300 seats and Lagos-Johannesburg about 2,000 seats.
Recently, the Irish Embassy in Nigeria and Enterprise Ireland declared interest to partner with Arik Air on the Irish Trade Mission to Nigeria in December 2015.

The Irish Ambassador stated that the trade mission to Nigeria is expected to be one of the largest in recent times and there would be a lot of interest in the aviation sector as there are about 250 aviation companies in Ireland. He stressed that the Irish Embassy in Nigeria is committed to improving trade relations between Nigeria and Ireland.

The Head of Africa Region, Enterprise Ireland, Fred Klinkenberg said Enterprise Ireland is the government organisation responsible for the development and growth of Irish enterprises in markets around the world. The organization, according to him, work in partnership with Irish enterprises to help them start, grow, innovate and win exports sales on global markets.

The development would make Arik the airline of choice. Arik would also be the official carrier to move the trade mission between Accra, Abuja and Lagos.
Arik Air has become a strong force in Africa due to the firm’s relationship with a number of Irish companies.

The immediate past President, Association of Stockbroking Houses of Nigeria (ASHON), Alhaji Rasheed Yussuf, said that the listing would enhance the country’s pension funds and leverage the number of investible stocks in the market.

Yussuf said that their listings would enhance the participation of Pension Fund Administrators (PFAs) in the market.
According to him, the effect of pension funds would be visible in the market through listing of multinationals such as MTN Nigeria Communication Ltd, Shell Petroleum Development Company, Globacom Nigeria Ltd and Airtel Nigeria Ltd, among others.
Yussuf also said that most PFAs had reduced their exposure in the market since 2008, following global financial meltdown to minimise loss due to fewer blue chip companies.

The President, Renaissance Shareholders Association of Nigeria, Olufemi Timothy corroborated that the listing would deepen the market.
“It will deepen the market. We love it. They are welcome, at least other Nigerians will benefit from their returns. A good feat.” he added.