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Click to edit Master title style LISTING OF NIGERIAN TELECOMMUNICATION COMPANIES ON THE NIGERIAN STOCK EXCHANGE Presented by Haruna Jalo-Waziri ED, Business Development, The Nigerian Stock Exchange at the Session with Telecommunication

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Click to edit Master title style LISTING OF NIGERIAN TELECOMMUNICATION COMPANIES ON THE NIGERIAN STOCK EXCHANGE

August 16, 2013 Presented by

Haruna Jalo-Waziri ED, Business Development, The Nigerian Stock Exchange

at the

Session with Telecommunication Companies in Nigeria

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Outline

1

  • Overview of Global Trends in Telecoms

2

  • Nigeria’s Comparative Advantage

3

  • Industry Challenges and Opportunities

4

  • The Nigerian Stock Exchange

5

  • Key Initiatives and Achievements

6

  • Listing on The Nigerian Stock Exchange

7

  • Premium Listing

8

  • Key Next Steps

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Overview of Global Trends in Telecoms

552 542 531 520 676 662 655 652

  • 200

400 600 800 2010 2011 2012* 2013*

New fixed-telephone subscriptions

Developing Developed

1,418 1,475 1,538 1,600 3,901 4,487 4,872 5,235

  • 2,000

4,000 6,000 2010 2011 2012* 2013*

New mobile-cellular subscriptions

Developing Developed Source: International Telecommunication Union (ITU) Figures are in millions * Estimates

New subscriptions observed to be on a slow decline New subscriptions growing faster in developing countries, compared to developed countries

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Overview of Global Trends in Telecoms Cont’d

529 683 788 934 249 472 768 1,162

  • 500

1,000 1,500 2010 2011 2012* 2013*

New active mobile-broadband subscriptions

Developing Developed

291 306 322 340 236 282 316 357

  • 100

200 300 400 2010 2011 2012* 2013*

New fixed (wired)-broadband subscriptions

Developing Developed Source: International Telecommunication Union (ITU) Figures are in millions * Estimates

New active subscriptions in developing countries, surpassed developed countries around 2012 and still on the increase The trend shows increased new subscriptions in developing countries, surpassing developed countries

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Nigeria’s Comparative Advantage

FACT & FIGURES

  • Post 2001 restructuring of the telecoms

industry, Nigeria now has one of the most liberalized regimes in Africa

  • Significant room for growth:
  • Teledensity has increased from

68.5% in 2011, 71.5% in 2012 to 83% in 2013. Slightly below developed counterparts (in excess of 100%)

  • Broadband penetration is below

10%

  • Over the next 5 years, research

estimates that over 61 million new subscribers will come on board

  • As Africa’s most populous nation,

with a growing middle class, Nigeria offers massive economic growth potential

0.62% 0.85% 1.06% 1.27% 1.53% 1.91% 2.31% 2.92% 3.66% 4.56% 5.67% 7.05% 8.53% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Mar'2013

% Contribution to GDP

Source: NCC

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Industry Challenges

Key Industry Challenges

  • Erratic power supply
  • Multiple levies
  • Vandalisation of equipment
  • Difficulty in obtaining Right of Way Approval
  • Insufficient resources to build required

infrastructure

  • Extraneous regulatory issues by government

agencies

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Opportunities

Key Opportunities

  • Increase in per capita income
  • Increase in linked ICT products (mobile banking, mobile adverts,

social networks)

  • Increased dependency of Telecom services by critical growth

sectors of the economy (Oil & Gas, Agric., Construction, etc.)

  • About one-third of total population of Nigeria is yet to have access

to mobile cellular service

  • Less than 10% broadband penetration, depicting a huge untapped

market (Source: NCC)

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About The Nigerian Stock Exchange

2nd Largest Exchange in Africa by Market Cap

  • Approx. 5 million investors: Foreign (51% of

market activity); Local investors (49% of market activity) Over 300 Dealing Member Firms and Issuing Houses Equity and bond products: 254 listed securities (N11.753t in 189 operating companies); 57 bonds (N4.10t in FGN bonds, N471.0b in State bonds, N1.40t in

  • Corp. bonds and N12b in Supranational

bond); N829.60m in 1 ETF Founded in 1960

14 electronic trading floors around Nigeria Figures as at Aug 15, 2013

Total Market Cap: N17.742Tn ($110.88bn)

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NSE Baseline Market Statistics – 12 Months

Value Traded ($) NSE ASI Index Value Volume Traded

15,000.00 20,000.00 25,000.00 30,000.00 35,000.00 Q3 2012 Q4 2012 Q1 2013 Q2 2013

  • No. of Deals

262,692 265,723 383,332 381,229

  • 100,000 200,000 300,000 400,000 500,000

Q3 2012 Q4 2012 Q1 2013 Q2 2013 21,891 21,137 31,833 26,508

  • 5,000

10,000 15,000 20,000 25,000 30,000 35,000 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Millions 998.32 1,134.08 1,593.97 2,104.08

  • 250.00

500.00 750.00 1,000.00 1,250.00 1,500.00 1,750.00 2,000.00 2,250.00 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Millions

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56.72% 28.80% 22.61% 13.78% 12.63% 10.54% 12.71% 5.39% 0.84%

  • 2.21%
  • 6.06%
  • 8.18%
  • 13.06%
  • 19.66% -22.14%
  • 30.00%
  • 20.00%
  • 10.00%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%

Ghana Comp. Nigeria ASI Nairobi SE DJIA S&P 500 SEMDEX NASDAQ Composite FTSE 100 FTSE/JSE FTSE AIM MASI Hang Seng WIG 20 EGX 100 IBovespa

Global Exchange Metrics – Indices

Strong Global Performance (H1 ’13)

  • H1 ‘13 performance shows the DJIA performing at 13.78%

reflecting the impact of the US’s QE stimulus

  • Although QE is driving performance of US capital markets, the

Nigerian market is being driven more and more by local investors as stated previously

  • As QE is phased out, global investors may seek to cover positions

in their respective local markets which may impact Nigeria in terms of foreign investors looking to sell down

  • Performance in the Euro zone as reflected in the FTSE AIM is still

sluggish as a result of the lingering debt crisis

  • Globally, Nigeria remains one of the most attractive markets

10 8/16/2013 The Nigerian Stock Exchange

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The NSE Five Pillars

  • 1. Targeted

business development efforts

  • 2. Stronger

regulatory environment

  • 3. 21st

century technologies

$1 Trillion Market Cap by 2016

  • 4. Growth

enabling market structure

  • 5. First-rate

investor protection programmes

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Term

2011 2012 2013 – 2014

NSE Key Initiatives

Within NSE Control

  • Market Segmentation 
  • Company Share Buy-Back 
  • Introduction of ETFs 
  • Investor Clinics 
  • New Web Site 
  • Revised Listing Rules 
  • Market Making (approved) 
  • Securities Lending (approved) 
  • Short Selling (approved) 
  • Enhancement of Regulatory Programs 
  • Financial Literacy Program 
  • IFRS Compliance 
  • Market Data Services 
  • Advocacy 
  • Market Making 
  • Securities Lending 
  • Short Selling 
  • Develop Product Liquidity and Depth
  • Attract and Retain More Listings
  • ASeM Re-Launch 
  • X-Issuer Portal 
  • CSR Program 

On-going

  • Product Innovation (e.g. ETFs, NDRs) 
  • Coop with Other Exchanges & Global

Orgs 

  • Policy Advocacy 
  • Demutualization 
  • Derivatives Feasibility Study
  • Transaction Cost Analysis
  • Enhanced Rulebook
  • Whistle Blowing Program
  • Delivery of X-Gen
  • Market Optimization
  • Operation of Investor Protection Fund
  • Automation of Transaction Lifecycle

Outside NSE Control

  • AMCON Debt Resolution 
  • Advocacy 
  • Review PFA Investment Guidelines 
  • Tax Breaks on Transaction Fees 
  • Exit Strategy for Privatized Entities 
  • Broker Margin Debt Resolution 
  • Broker Access to Funding
  • Policy on Large Cap Firms
  • Access to SWF Funds
  • Reduce Focus on Dividends
  • Capacity of Local Institutional Investors 

(on-going)

NSE Scorecard

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Success Recorded So Far in Advocacy

  • 1. VAT and Stamp Duty elimination from

secondary market transaction cost

(Awaiting gazzetting)

  • 2. Margin Debt Relief by AMCON

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On-going NSE Advocacy Efforts

Review of PENCOM Asset Allocation Policy for PFAs

Biggest pool of long-term investable capital (N3.4t) Guidelines very limiting in the types of assets in which PFAs can invest Our Recommendation Permit securities lending, participation in IPOs, exposure to ETFs, and other asset classes * Pending revision of PENCOM guidelines

Sovereign Wealth Fund

Creates buffer for market volatility created by foreign portfolio investors Solution to missing major local institutional investor in our market Our Recommendation Increase the exposure of the Future Generations Fund (Currently at 32.5% of SWF) in the Nigerian capital market

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On-going NSE Advocacy Efforts Cont’d

Review of Exit Strategy for Privatized Government Entities

Use capital market to address transparency, corporate governance, risk and public perception issues, while providing public opportunity to participate Our Recommendation Simultaneous listing of companies earmarked for privatization at the time they are sold

PPP Underutilization

  • f the Capital Market

USD 56.5b investment required to meet Vision 20:2020 targets in key sectors Urgent need to attract diverse sources of capital, e.g., companies and funds that have raised capital from the market Our Recommendation ICRC should make provisions for listed companies and funds in the ICRC Manual 15 8/16/2013 The Nigerian Stock Exchange

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On-going NSE Advocacy Efforts Cont’d

Local Content Policy in Nigeria

The Policy provides certain privileges to complying off-shore companies in Nigeria Current requirement is for minimum 51% stake by local investors/shareholders Our Recommendation Definition by SEC to make listed companies Local Content Compliant, without having up to 51% stake by local investors/ shareholders to be made official

Method Review of Award of Government Contracts by BPP

The Bureau of Public Procurements currently monitors and oversees public procurements in across Nigeria Our Recommendation Listed companies to be given preference in the award of contracts Restrict certain contracts to listed companies 16 8/16/2013 The Nigerian Stock Exchange

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Premium Listing

The Nigerian Stock Exchange is currently developing guidelines for companies to be admitted to its proposed Premium Board

A key tool in determining qualifying companies will be a Corporate Governance Index (CGI), which will rate companies listed on The Exchange in terms of Corporate Governance Practices

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Specific Benefits of Listing to Telcos

Broad ownership base, increased public interest and participation Enhanced vigilance and protection of Telco assets against vandalisation Strong support by participating stakeholders to address challenges facing the industry Will be beneficiaries of NSE’s advocacy efforts for large cap companies (e.g. tax incentives)

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Further Benefits of Listing

  • Telco. Plc

Access to Long Term Capital for Growth & Expansion Transparency and Credibility in Operation Perpetuity of Operations Code of Corporate Governance as a competitive tool Risk Sharing amongst Shareholders Shared Ownership within country

  • f operation

Platform for attracting additional investment and investors Value Creation & Price Discovery

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Major Concerns About Listing

Valuation The NSE has introduced efficient systems which provide the platform for true valuation of listed companies, from all available public information Market Depth & Liquidity There is increasing interest and participation by both local and foreign institutional and retail investors in the Nigerian capital market with average daily trades currently at $35m as against $17m in 2012 Shareholder Association The NSE, in conjunction with the SEC is writing rules around conduct of AGMs, which would guide activities and participation by all stakeholders, including Shareholder Associations at AGMs Cost of Listing The SEC has capped total cost at 4.3% (NSE fees 0.3%

  • f market cap for IPOs and

0.3% of nominal value of listing by introduction) plus negotiable professional fees

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Additional Disclosures Public interest companies should be transparent so as to improve public perception and confidence Arbitrary Tax The Joint Tax Board, in partnership with The Exchange thrives to ensure no arbitrary tax payments are made by listed companies, as a result of being listed

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Selected Listed Telcos

China Mobile Ltd

  • Listed on Hong Kong Stock

Exchange

  • Present in 3 countries
  • 1-Yr Return: -0.94%
  • PE (ttm): 10.06x
  • Mkt Cap (US$’b): 212.33

Verizon Communications Inc

  • Listed on New York Stock

Exchange

  • Present in 1 country
  • 1-Yr Return: +15.76%
  • PE (ttm): 21.60x
  • Mkt Cap (US$’b): 144.92

Vodacom Group Plc

  • Listed on Johannesburg Stock

Exchange

  • Present in 1 country
  • 1-Yr Return: +34.19%
  • PE (ttm): 13.01x
  • Mkt Cap (US$’b): 17.10
  • Part of Vodafone Group

Vodafone Group Plc

  • Listed on London Stock

Exchange

  • Present in 22 countries
  • 1-Yr Return: +11.52%
  • PE (ttm): 220.50x
  • Mkt Cap (US$’b): 140.42

Source: Bloomberg

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  • There is growing support for compulsory listing of telcos at the

national assembly

  • Increasing calls to link license renewal to listing
  • Increasing negative public perception of oligopoly in industry
  • We are not averse to these positions but will continue to

engage all parties in the hope that public interest companies including telcos would be listed or at least on the part to listing within the next 12 months

  • The current flexibility and gains from this process of

engagement and advocacy at the highest levels of government could be lost if not acted upon

Conclusion

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Stock Exchange House 2 - 4 Customs Street P.O. Box 2457, Marina Lagos Island, Lagos, Nigeria listingsales@nse.com.ng www.nse.com.ng

Thank You