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MTN BEE on indefinite hold

Candice Jones
By Candice Jones, ITWeb online telecoms editor
Johannesburg, 13 Mar 2009

MTN employees expecting to join in MTN's black economic empowerment (BEE) deal may have to wait for quite a while.

Speaking at the company's annual results presentation yesterday, MTN CEO Phuthuma Nhleko said the company “decided not to ask shareholders to pull money from their savings until the markets stabilise”.

However, analysts have been unable to predict when, or if, stability in the international financial markets can be expected. Some believe there is worse yet to come, cautioning businesses and consumers to tighten belts over the next three to five years, possibly more.

Nhleko did not indicate when MTN believed the markets would recover, although he did say the deal was still on the cards, and could be expected as soon as the global financial markets start to even out.

Good gains

The BEE deal was expected to be rolled-out at the beginning of this year, following the unwinding of Alpine Trust-owned investment business Newshelf 664.

Newshelf was created independently of MTN in 2002, which MTN management used to buy an equity stake in MTN. It was built off the back of Transnet shares, sold at R13.90, and was designed to unwind by December last year.

The new BEE deal was expected to follow a similar structure, only it would have been directly linked to company shareholders. The deal was canned with a simple statement saying the economic crisis was holding it back; however, the unwinding of Newshelf was completed.

According to Nhleko, the company has paid out the expected dividend to eligible shareholders. The value of Newshelf's stake in MTN is estimated to have been valued at R24.4 billion (13.1% stake in MTN), granting particular shareholders a comfortable windfall.

At yesterday's presentation, Nhleko said 3 000 employees and ex-employees were handed a dividend. Eligible management would have included Nhleko, COO Sifiso Dabwenga, and former MTN director Irene Charnley, among others.

Chasing equity

The BEE deal would have benefited black employees, since a large chunk of the unwinding shares had been allocated to black participation. The company also opened the deal to black South Africans in general.

"Eligible employees of MTN and black South African non-executive directors of MTN will also be invited to participate in the BEE transaction," the company said at the time of the original announcement.

Vodacom completed its massive participation deal last year. The company's R7.5 billion broad-based empowerment deal was heavily oversubscribed, which could be an indication to a possible response to MTN's BEE deal.

There has been little market reaction to the canning of the deal; however, analysts have mixed feelings around the issue. Some say MTN made the right choice holding off on the transaction, while others are confident it should have gone through.

However, Nhleko said yesterday the deal would definitely be reinstated at some point, indicating it is one of the “key building blocks of the company”.

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