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Share price drop hands BTCL sour birthday gift

Seeking value: Masunga says BTCL is focussed on growth
The Botswana Telecommunications Corporation Limited’s (BTCL) share price dropped to an all-time low on Monday, souring the group’s 40th anniversary celebrations for shareholders.

The telecomm group’s shares dropped from a previous record low of 69 thebe to 68 thebe on Monday, hours after executives had marked the anniversary celebrations with a bell-ringing ceremony at the Botswana Stock Exchange (BSE). On Tuesday, BTCL sank further to the fresh record of 65 thebe,.

This week’s slide fall was the continuation of weakness seen in BTCL’s share price since it listed. Thus far this year, BTCL is the BSE’s worst performing local counter, having shed nearly 32% in value since January. Since listing at P1.15 in 2016, BTCL has only performed above that listing price between mid-2016 and mid-2018, losing value throughout the rest of the period.

BTCL is the BSE’s most retail-investor heavy counter, with about 50,000 individual shareholders, of whom about 26,000 hold less than 2,000 shares each.

Brokers and analysts have attributed BTCL’s wild swings and general downtrend in share price on the heavy presence of these individual investors, who are associated with impulse trading behaviours such as panic selling. Retail investors are also known to seasonally ‘cash out’ for holidays, school fees and other expenses.

In addition, analysts have said government’s decision to limit the trading of BTCL’s shares to citizens and citizen-owned companies has restrained the share price discovery and value unlocking available to other BSE counters.

This week, analysts said the BTCL’s losses this year were worsened by the fact that its shareholders were cashing out to help supplement their novel coronavirus (COVID-19) incomes. In addition, the BTCL board’s decision not to declare a final dividend for the year ended March 30, 2020 rubbed investors the wrong way.

“The pressure on the BTCL share price emanates from a supply demand mismatch whereby retail investors are flooding the market with sell orders whilst there is minimal demand,” Stockbrokers Botswana research analyst, Donald Motsomi told BusinessWeek in an emailed response.

“Traditionally, this has usually been the cause of loss of value in the share price but this time it could be exacerbated by financial pressure on households as more individuals look for alternate sources of liquidity amidst a labour market characterised by employment uncertainty and pay cuts.”

He added: “Furthermore, BTCL has historically paid handsome dividends which were an

incentive for investors to buy the stock. With dividends currently halted by the telco giant, investors have been become less interested in the counter, further augmenting the supply demand mismatch.”

In its annual report released in September, BTCL directors said they appreciated that investors had been looking forward to the dividends.

“Though the board recognises the importance of dividends to our shareholders, due to uncertainties presented by the COVID-19 pandemic, the board has opted not to declare a final dividend for the second half of the year,” directors said.

The directors added that looking ahead, the corporation would continue to focus on “leveraging its network investments to build digital solutions that enable businesses to operate, and our people to live connected”.

“Opportunity exists to increase share in the data consumption arena in particular upscaling customers to 4G platforms to lessen impact of headwinds on the voice performance,” directors said.

“The recent investments in fixed and mobile broadband put BTC in pole position for the next phase of growth by di­fferentiation through reliability, speed and coverage, laying a foundation for the Fourth Industrial Revolution.

“BTC will undertake a structural cost reduction programme enabled by digital transformation and automation in order to drive core earnings growth.”

Group MD, Anthony Masunga has previously revealed that the corporation has engaged government, its main shareholder, on opening up the trading of its shares.

“As much as we appreciate the structure of our shareholding, we think there’s more that can be done to help,” he previously told BusinessWeek.

“A lot of value has been locked up. A lot of value is locked out.”

Masunga said while institutional investors were willing to take up positions in BTCL and add value, they were driven away either by the volatility or lack of access.

“If a fund is ‘tainted’ with 0.001% of non-citizen money, it’s excluded and yet those funds are available in the market and they are participating in other stocks.

“It’s also difficult to build a significant position because the stock is so thinly held; it would take a lot of time,” he said.

Analysts, however, have said hopes of restrictions on BTCL trades being lifted were “a pie in the sky in the short term”.


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