MTN may create another empowerment scheme to replace MTN Zakhele

MTN, Africa’s largest mobile phone operator by subscribers, may create another empowerment scheme. By Gugu Lourie

MTN Zakhele, the Black Economic Empowerment (BEE) scheme of MTN, will be maturing in November 2016.

“MTN continues to evaluate alternatives for a new Black Economic Empowerment(BEE) share scheme that may come into effect on the expiry of the MTN Zakhele share scheme in November 2016,” MTN Zakhele informed investors on Monday on the JSE.

“As part of this new scheme, it is possible, although not yet certain, that holders of MTN Zakhele ordinary shares at the time will be granted the opportunity of a partial re-investment into the new BEE share scheme on terms yet to be determined”.

Established in 2010, MTN Zakhele is a vehicle for previously disadvantaged South Africans to invest in MTN Group.

MTN Zakhele was transferred from the over-the-counter (OTC) to the JSE’s BEE board from November 5. It owns 48.5 million ordinary and preference shares in MTN, translate into a 4% shareholding in the mobile phone giant. Most MTN Zakhele shareholders, some 87%, hold fewer than 500 shares each, ensuring the broad-based nature of the scheme.

The performance of the MTN Zakhele share price is linked to that of MTN Group. To this end, the decline in the share price of MTN Group over the past few months due to, among other factors, the imposition by the Nigerian authorities of a fine has also led to a decline in the share price of MTN Zakhele.

At the end of 2015, the MTN Zakhele share closed at R73,90, down 32% from the closing price of R108,50 a year earlier. However, it is important to note that the share price at the end of 2015 still represents an almost 270% gain on the initial investment of R20 per share investors paid for each MTN Zakhele share in 2010.

The share is currently trading at more than R60/share.

The unwinding of the scheme is expected in November 2016.

The company said on Monday that it “is still envisaged that, either Option 1 or 2 or both such Options will be made available to the shareholders of MTN Zakhele ordinary shares. In addition, Option 3 may also be made available if so decided on and approved by the board of MTN Group Limited and its shareholders”.

MTN Zakhele’s option 1 is a cash settlement equivalent to the value of their MTN Zakhele ordinary shares at the time (after taking into account liabilities to funders, the unwinding costs and associated taxes). Its option 2 is a combination of MTN shares and cash settlement equivalent to the value of their MTN Zakhele ordinary shares at the time (after taking into account liabilities to funders, the unwinding costs and associated taxes).

While Option 3 may offer shareholders of MTN Zakhele ordinary shares an opportunity of a partial re-investment into the new MTN BEE share scheme on terms yet to be determined.

MTN Zakhele also advised its shareholders to exercise caution when dealing in its ordinary shares until the full terms announcement in relation to the unwinding is published. “MTN Zakhele expects to be in a position to provide a further update on the Unwinding steps and processes by the end of July 2016”.

Vodacom employee BEE scheme converts in 2019

But the employee chapter in Vodacom’s R7.5 billion black economic empowerment (BEE) scheme will be converted into tradable YeboYethu shares in 2019 following a delayed pay day.

The conversion news is carried in the 2014/15 annual report. The annual report says Vodacom employee empowerment trust’s initial seven-year maturity period ends in August 2015.

The scheme’s pay day had to be postponed due to stubbornly high debt. There was some commotion from the Vodacom ranks when the news of the postponement of the initial maturity date was made last year.

Furthermore, Vodacom has positioned its enterprise development programme, the Innovator Trust, as a buyer of its black economic empowerment (BEE) shares called Yebo Yethu.

This is reflected in the 2014/15 annual report where Vodacom declares that the Innovator Trust acquired more than 540 000 YeboYethu. This, says Vodacom, has come to advance its BBBEE credentials

The group said “The Innovator Trust utilised the loan funding obtained from Vodacom to acquire YeboYethu shares from the black public.

While, in December, Blue Label Telecoms announced that it is planning to buy 35% of Cell C.

The transaction would see Blue Label Telecoms inject R4 billion in a subscription for 35% of Cell C’s total issued share capital at the conclusion of Cell C’s recapitalization programme.

The mobile phone operator said the recapitalisation programme will reduce Cell C’s net debt from the high double-digit numbers to a very manageable maximum of R8 billion or less when implemented.

The target is to reduce the debt further over the next 12 months.

The management on behalf of the employees of Cell C has also submitted a binding offer to co-invest in the mobile phone operator with Cell C’s current shareholder, 3C Telecommunications and Blue Label.

Cell C employees will then hold around 30% of the total issued share capital in Cell C at a cost of R2.5 billion at the conclusion of the restructuring programme.

Telkom is reviewing its BBBEE programmes as its empowerment equity partner, Elephant Consortium, exited the business six years ago after its investment reached maturity.