Close Menu
TechCentralTechCentral

    Subscribe to the newsletter

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    Facebook X (Twitter) YouTube LinkedIn
    WhatsApp Facebook X (Twitter) LinkedIn YouTube
    TechCentralTechCentral
    • News

      Vodacom fibre play pushes Maziv valuation above Telkom’s

      20 July 2025

      Crypto industry shoots for mainstream adoption

      20 July 2025

      Vodacom’s Maziv deal gets makeover ahead of crucial hearing

      18 July 2025

      Cut electricity prices for data centres: Andile Ngcaba

      18 July 2025

      Takealot taps Mr D to deliver toys, pet food and future growth

      18 July 2025
    • World

      Grok 4 arrives with bold claims and fresh controversy

      10 July 2025

      Samsung’s bet on folding phones faces major test

      10 July 2025

      Bitcoin pushes higher into record territory

      10 July 2025

      OpenAI to launch web browser in direct challenge to Google Chrome

      10 July 2025

      Cupertino vs Brussels: Apple challenges Big Tech crackdown

      7 July 2025
    • In-depth

      The 1940s visionary who imagined the Information Age

      14 July 2025

      MultiChoice is working on a wholesale overhaul of DStv

      10 July 2025

      Siemens is battling Big Tech for AI supremacy in factories

      24 June 2025

      The algorithm will sing now: why musicians should be worried about AI

      20 June 2025

      Meta bets $72-billion on AI – and investors love it

      17 June 2025
    • TCS

      TCS+ | Samsung unveils significant new safety feature for Galaxy A-series phones

      16 July 2025

      TCS+ | MVNX on the opportunities in South Africa’s booming MVNO market

      11 July 2025

      TCS | Connecting Saffas – Renier Lombard on The Lekker Network

      7 July 2025

      TechCentral Nexus S0E4: Takealot’s big Post Office jobs plan

      4 July 2025

      TCS | Tech, townships and tenacity: Spar’s plan to win with Spar2U

      3 July 2025
    • Opinion

      A smarter approach to digital transformation in ICT distribution

      15 July 2025

      In defence of equity alternatives for BEE

      30 June 2025

      E-commerce in ICT distribution: enabler or disruptor?

      30 June 2025

      South Africa pioneered drone laws a decade ago – now it must catch up

      17 June 2025

      AI and the future of ICT distribution

      16 June 2025
    • Company Hubs
      • Africa Data Centres
      • AfriGIS
      • Altron Digital Business
      • Altron Document Solutions
      • Altron Group
      • Arctic Wolf
      • AvertITD
      • Braintree
      • CallMiner
      • CambriLearn
      • CYBER1 Solutions
      • Digicloud Africa
      • Digimune
      • Domains.co.za
      • ESET
      • Euphoria Telecom
      • Incredible Business
      • iONLINE
      • Iris Network Systems
      • LSD Open
      • NEC XON
      • Network Platforms
      • Next DLP
      • Ovations
      • Paracon
      • Paratus
      • Q-KON
      • SevenC
      • SkyWire
      • Solid8 Technologies
      • Telit Cinterion
      • Tenable
      • Vertiv
      • Videri Digital
      • Wipro
      • Workday
    • Sections
      • AI and machine learning
      • Banking
      • Broadcasting and Media
      • Cloud services
      • Contact centres and CX
      • Cryptocurrencies
      • Education and skills
      • Electronics and hardware
      • Energy and sustainability
      • Enterprise software
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Lifestyle
      • Motoring
      • Public sector
      • Retail and e-commerce
      • Science
      • SMEs and start-ups
      • Social media
      • Talent and leadership
      • Telecoms
    • Events
    • Advertise
    TechCentralTechCentral
    Home » In-depth » MTN’s Zakhele Futhi: weighing up the options

    MTN’s Zakhele Futhi: weighing up the options

    By Editor27 August 2016
    Twitter LinkedIn Facebook WhatsApp Email Telegram Copy Link
    News Alerts
    WhatsApp

    MTN-640

    MTN has announced plans for the introduction of its third black economic empowerment deal, valued at R9,9 billion, and it’s received a great deal of attention from investors and analysts alike.

    The proposed scheme will see the issue to MTN Zakhele Futhi, the single shareholder, of a 4% stake in MTN Group. Shares will be priced at R102,80, representing a 20% discount to the 10-day volume weighted average per MTN share of R128,50 on 17 August.

    MTN will structure the discount through additional equity in the empowerment vehicle and will be leveraged through vendor and third-party funding. The scheme is set to run for an eight-year period in which investors will be locked in for three years after which they will be restricted in terms of whom they may trade with.

    The scheme will take the form of a public offering where qualifying black participants will be invited to subscribe for a minimum investment amount of R2 000. Shareholders of the maturing MTN Zakhele scheme, to be unwound in November, will be given the opportunity to reinvest a portion of their MTN Zakhele shares in the new MTN Zakhele Futhi.

    In addition to the scheme, a new employee share ownership plan for MTN staff, excluding directors and management, is proposed. MTN will issue 0,1% of its issued share capital and the scheme will not require equity from eligible participants.

    Shareholders will need to approve the proposed empowerment transaction, further details of which are expected to be released in September. Given this, it is worth relooking at the mechanics of the MTN Zakhele scheme and the value it will, on its unwinding, provide to those who invested six years ago.

    At the time of the deal in 2010, much noise was made around the fact that the success of the scheme depended heavily on the performance of the MTN share price, which at the time was around R122. Commentators believed that the share price could, six years on, conceivably be close to R225. To the extent that it fell below this level, the returns would be less attractive but still meaningful and if it slumped below R109, according to an article in Business Report at the time (MTN Zakhele an attractive risk, by Ann Crotty on 8 September 2010), then investors would lose all their money. The MTN share price is currently R124,30/share, dogged by experiences in Nigeria and a highly competitive environment, which has weighed heavily on prices and subscriber growth.

    The MTN Zakhele offer was 1,7 times oversubscribed, raising R2,8bn, though capital allocated was R1,6bn. While some 87% of shareholders hold fewer than 500 shares each, media reports at the time cited Cyril Ramaphosa as having been allocated R187,3m worth of shares equivalent to 9,4m shares, while Phuthuma Nhleko, MTN’s CEO, was allocated 2m shares at a price of R40,2m. It will be interesting to see if the new scheme has restrictions on the amount one individual is allowed to invest.

    MTN's operational footprint
    MTN’s operational footprint

    For every R2 000 invested by black participants, MTN and funders put in R8 000. R1 600 of this was MTN’s donation (read: cost to shareholders), the remaining R6 400 had to be paid back before the scheme participants received anything.

    According to the article, the external funders provided R2,2bn, and will be the first in line to be repaid, then MTN will be repaid the R3,2bn plus interest that it provided for the transaction. Zakhele’s financial results in March this year reflected the R964,6m dividend generated from its stake in MTN Group was utilised to settle some of these obligations. This was a rise on the R836,5m paid out in 2014, enabling Zakhele to repay debt in excess of the budgeted repayment schedule.

    When the scheme matures on 24 November, Zakhele will hold 75,4m MTN shares. According to the MTN company announcement released this week, if one assumes a share price of R133,19 (as at 17 August), 29,3m shares will be repurchased to settle third-party preference share funding, notional vendor finance, taxes and costs, leaving 46m shares to distribute to participants. The number of shares may well be less considering the MTN share price has weakened further and the unwinding is still three months off. But much will depend on the final MTN share price used and the dividends paid.

    Zakhele shareholders will need to decide whether they will vote in favour of unwinding the scheme, if they are to re-invest in the proposed new empowerment vehicle and/or take cash, and if the 20% discount is enough given the company’s performance of late and the eight-year lock-in period. If the scheme is not implemented, the shares are expected to remain listed on the JSE, although current trading restrictions will no longer apply after 24 November. While Zakhele will no longer hold 4% of MTN share capital, following repayment of funding, shares will be debt free.

    • This article was originally published on Moneyweb and is used here with permission


    MTN MTN Zakhele MTN Zakhele Futhi Zakhele Zakhele Futhi
    Subscribe to TechCentral Subscribe to TechCentral
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email Copy Link
    Previous ArticleTo succeed, Apple Music needs mobile friends
    Next Article Guptas to quit SA for good

    Related Posts

    Mobile money lifts Africa savings to decade high

    17 July 2025

    MTN Group appoints new chief enterprise officer

    16 July 2025

    South Africa’s telcos battle to monetise 5G as 4G suffices for most

    15 July 2025
    Company News

    Vertiv to acquire custom rack solutions manufacturer

    18 July 2025

    SA businesses embrace gen AI – but strategy and skills are lagging

    17 July 2025

    Ransomware in South Africa: the human factor behind the growing crisis

    16 July 2025
    Opinion

    A smarter approach to digital transformation in ICT distribution

    15 July 2025

    In defence of equity alternatives for BEE

    30 June 2025

    E-commerce in ICT distribution: enabler or disruptor?

    30 June 2025

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2025 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.