SIKI MGABADELI: MTN is launching a new R9.9bn black economic empowerment transaction, called MTN Zakhele Futhi, when its existing special-purpose empowerment vehicle MTN Zakhele contractually unwinds on November 24 this year. MTN Zakhele Futhi is a special-purpose vehicle that will hold about 4% equity in MTN Group.
Let’s chat with Duncan McLeod, editor at TechCentral. Duncan, thanks so much for your time this evening. As Carmen and I were chatting, this was more or less expected.
DUNCAN McLEOD: It was. MTN’s been talking about doing this for some time, and the original MTN Zakhele BEE empowerment scheme was always going to last for only six years. It was originally created back in 2010, and was always going to come to an end on November 24 of this year. And MTN management has been signalling for some time that they were looking to launch a new scheme to house the interests of the group.
SIKI MGABADELI: Those original investors who bought at R20 per share at inception in 2010, are now looking at their investment, and how far it’s come in the past six years. Was it worth it for them to stay with it?
DUNCAN McLEOD: Definitely. It’s done incredibly well. Of course, if they’d sold a couple of years ago when MTN was at its peak, before the troubles that emerged in 2015 with the fine in Nigeria, and some of the other operational problems that have since emerged, then they would have done even better. But if you were in that scheme back in 2010 you are still sitting in the pound seats as it were.
SIKI MGABADELI: What does it mean, then, for those who decide to come in now, when you are looking at the current problems that are happening right now and the future projected earnings growth?
DUNCAN McLEOD: I think you really have to take a call on the potential of the group. There’s a new CEO coming in towards the middle of next year, Rob Shuter, who’s been hired from Vodafone in Europe, a South African individual. You really have to take a look at what’s likely to happen in the key markets in which MTN operates. I think particularly markets like Nigeria, Iran to a lesser extent, and also South Africa.
The Nigerian economy is in a lot of trouble at the moment. The question is, is it going to be in trouble in the longer term, or is this just a short-term hiccup? The South African operation has obviously been facing some challenges as well, not only because of the economy here in South Africa, but still some challenges of its own of its own making. But there are signs that the MTN South African operation is turning around. So I think you have to take a call on that.
MTN has said that its offer price for the new BEE scheme is going to be at a 20% discount to the volume weighted average share price over eh past ten days, which works out to about R102/share, which is actually a very good offer price. If you consider the degree to which the MTN share price has come off over the past six to nine months or so, and this is a further 20% discount on that already lowish share price, I think it’s quite difficult to see this new scheme not generating returns for shareholders over the next few years.
SIKI MGABADELI: We’ll leave it there. Thanks to Duncan McLeod.