MTN's empowerment ownership scheme, MTN Zakhele, has accelerated the reduction of its debt by ploughing back dividends from the listed cellular operator to trim what it owes.
Around 124 000 applicants across the country applied to own a stake in the R8.2 billion empowerment deal, which was implemented in 2010. About R2.8 billion was raised from investors and the scheme was oversubscribed at 1.7 times.
Zakhele also received a R1.3 billion donation and vendor financing of R3.2 billion from MTN, while third-party funding amounted to R2.16 billion. According to the scheme's latest annual report, it has fully paid down the Class B preference shares, and now only Class A and vendor financing still need to be settled.
The annual report states that dividends have also been paid out to people who owned A and B preference shares in the 2011 financial year, as well as in March this year.
Chairman Thulani Gcabashe explains that Zakhele's success is wholly dependent on MTN's success and ongoing receipt of dividends to service and repay debt. The annual report notes that MTN paid Zakhele R468.8 million in dividends in the 2011 year.
MTN Zakhele is, to date, SA's largest empowerment scheme in the telecommunications industry. Its structure is expected to run for a six-year period, although investors can sell their shares after year three to other black investors.
Share