There is life after MTN Zakhele, the black economic empowerment scheme of telecommunications giant MTN, which is widely viewed to have created value for investors.

On Monday, MTN announced that it will launch another BEE scheme called MTN Zakhele Futhi when MTN Zakhele expires in November. The new scheme is valued at R9,9bn.

The formation of another scheme will add to several BEE models that were open to the public by MTN since it launched the Ikageng scheme in 1997.

The new scheme is one of three options that Zakhele gave 124 000 black investors for when the scheme expires, which includes investors reinvesting their shares in Zakhele Futhi for eight years. The other two options include investors cashing in their Zakhele shares or accepting MTN Group shares.

Just like the Zakhele scheme, the only asset that Zakhele Futhi will hold is a 4% stake in its parent company MTN Group. The MTN shares, to be issued to Zakhele Futhi, will be issued at R102,80, which represents a 20% discount to the 10-day volume weighted average price per MTN share of R128,50 on 17 August.

Assuming that there might be no trading of shares for the first three of the eight years in Zakhele Futhi (as part of the imposed restrictions), investment principal at MMI Holdings Riaz Gardee says the 20% discount “does not seem adequate for the restrictions, lock-in period and prospects of the company over the next eight years”.

Whichever option that investors choose, market watchers say that the scheme has created value for early investors. Black investors subscribed for Zakhele shares at R20/share six years ago, and the share price has since increased more than four times to about R61,60/share at the time of writing.

Gardee says that the share price appreciation implies a compounded annual growth of about 20%/annum “which is a return investors would be pleased with”.

“But an investor needs to consider their personal circumstances when making an investment decision [on the three options],” he adds.

Further details of the new scheme will be unveiled in September in a prospectus.

MTN’s share price and its dividends paid until November will play an important role when it comes to the amount to be distributed to shareholders when the scheme expires.

Based on the value of Zakhele’s stake in MTN on Monday (R9,8bn) and assuming the debt of R3,8bn is paid by November, the scheme already has a windfall of about R6bn, which is likely to be distributed as MTN shares.