BY THABISO MOCHIKO, 23 AUGUST 2016,
MTN Group said on Monday it would sell a 4% stake to black investors in a deal worth R10bn.
The new empowerment scheme will help MTN SA meet the black ownership requirement for a radio frequency spectrum licence application as it will translate into an indirect ownership of more than 30% in the unit.
The new scheme, MTN Zakhele Futhi, will replace MTN Zakhele, which will be unwound in November.
Existing MTN Zakhele shareholders will be given an option to reinvest a portion of their shares in MTN Zakhele Futhi.
MTN group executive chairman Phuthuma Nhleko said this new transaction‚ together with the continuing contribution of the MTN Zakhele transaction‚ “will translate to an effective indirect see-through black ownership in excess of 30% of MTN’s South African operations”.
Black Lite Consulting MD Ajay Lalu said the new scheme was encouraging existing shareholders to reinvest. “There is no real incentive for them not to continue to invest,” he said.
However, said Lalu, the 4% was not enough. He also questioned on which basis a 4% see-through deal would result in a 30% indirect ownership in MTN SA. He said the telecommunications regulator, the Independent Communications Authority of SA, and the government needed to be clear about their requirements.
MTN will sell the shares at R102.80, a 20% discount on the 10-day volume weighted average price of R128.50 per share recorded last Wednesday. New investors will require a minimum of R2,000 to be share subscribers.
In addition to the new MTN Zakhele Futhi scheme, MTN will issue 0.1% of its issued shares to staff, excluding directors and management. The shares will be held in a trust.
Mergence Investment Managers analyst Peter Takaendesa said the transaction was necessary for the long-term sustainability of MTN in SA.
Moreover, he said, it would ensure that value created by MTN could be shared with its employees and a broader base of previously disadvantaged citizens as shareholders in the company. “Existing shareholders will obviously benefit directly if the deal qualifies MTN to gain access to valuable and scarce spectrum to roll out nationwide broadband services efficiently,” Takaendesa said.
By maintaining empowerment at a group level, MTN is providing investors with a diversified exposure to 22 countries where it operates.
MTN Zakhele chairwoman Sindi Mabaso-Koyana said: “MTN Zakhele Futhi was an eight-year scheme, during which various trading restrictions would apply.
“MTN Zakhele Futhi shares may become listed on a recognised stock exchange on or after the third anniversary of the issue date.”
She said should MTN Zakhele Futhi not be implemented, the scheme would become operative on a standalone basis and that MTN Zakhele shareholders would receive MTN Group shares, or shares and cash in proportions they would have elected.
According to MTN, the MTN Zakhele scheme had created exceptional value for its 124,000 black investors over the past six years.
Despite the challenges, MTN went through in recent months, there was still upside in the stock, Lalu said. “The stock has had to recoup a lot of its losses from the Nigeria debacle. Maybe the upside is limited.”
MTN’s share price fell substantially in October 2015 when the group’s Nigerian unit was handed a multibillion-rand fine for breaching the subscriber registration law in Nigeria.
Takaendesa expected other operators also to sell shares to black investors to meet the spectrum requirements. “We appreciate that implementing such a transaction may be more challenging for the other operators, given their shareholding structures, but complying with licensing requirements is key to the long-term sustainability of any business.”
Vodacom and Telkom are nowhere near the 30% empowerment requirement. Vodacom claims to have 19% black ownership at its South African operations. Cell C has 25% black ownership, but it is in the process of selling to new investors.