Johannesburg - MTN Group plans to sell a 4 percent stake for R9.9 billion to black South Africans to meet the black economic empowerment (BEE) requirements of the spectrum licensing process.
This will see 30 percent of MTN’s South African operations in indirect black hands and will open the door for it to participate in the Independent Communications Authority’s (Icasa) radio frequency spectrum licensing process.
Icasa wants applicants in the spectrum licence auction process to have a minimum of 30 percent black equity.
MTN said yesterday that the new empowerment structure, MTN Zakhele Futhi, would be launched through a public offer next month. It will replace the existing empowerment vehicle, MTN Zakhele, which was established in 2010 and matures on November 24.
Executive chairman Phuthuma Nhleko said transformation and empowerment remained at the core of MTN’s ethos and culture. “This new transaction, together with the continuing contribution of the MTN Zakhele transaction, will translate to an effective indirect 'see-through' black ownership of MTN’s South African operations.”
Opportunity
The new empowerment structure will have a duration of eight years and has been designed to offer an opportunity for long-term participants in the transaction.
MTN said shares would be issued to MTN Zakhele Futhi at R102.80 a share, a 20 percent discount to the 10-day volume weighted average price per MTN share on August 17 of R128.50.
Among others, MTN will issue a public offering in terms of which black participants will be invited to subscribe for MTN Zakhele Futhi ordinary shares, and a re-investment offer, in which MTN Zakhele shareholders will be invited to receive a portion of their investment in MTN Zakhele Shares to MTN Zakhele Futhi Shares.
MTN said it would provide MTN Zakhele Futhi with funding and vendor facilitation through, among others, the notional vendor funding and a subordinated loan from MTN.
In addition to the new MTN Zakhele Futhi scheme, the board proposed the introduction of a new employee share ownership plan (Esop) for MTN staff, excluding directors and management.
The new Esop scheme will not require equity from eligible participants. MTN said it would issue approximately 0.1 percent of its issued share capital to be held in a trust for the benefit of these employees.
MTN Zakhele was a boon after increasing almost fourfold from R20 a share at inception to about R77 a share when the share price closed last week. “That equates to a total return of about 400 percent and compound annual growth of about 26 percent,” MTN said.
Old Mutual Equities analyst Philip Short said after the deal, there would be an effective indirect see-through of historically disadvantaged Individuals ownership in excess of 30 percent of its local operations. “This means MTN will be compliant with the requirements to obtain new spectrum.”
Sibonginkosi Nyanga, an analyst at Momentum SP Reid, said empowerment was a must considering the spectrum auction requirements.
BUSINESS REPORT