Press Releases

MTN to launch public offer to HDIs to sustain BEE ownership

The MTN Group is pleased to announce that it will propose to its shareholders a new BEE transaction aimed at maintaining the company’s BEE status in support of South Africa’s Broad-Based Black Economic Empowerment Codes of Good Practice (Codes).

MTN will launch a public offer that will be open to members of the South African public who are black people as defined in the Codes in order to broaden participation in its empowerment initiatives. Eligible employees of MTN and black South African non-executive directors of MTN will also be invited to participate in the BEE Transaction.

To date MTN has derived the major portion of its BEE equity ownership points from the Alpine Trust, which holds 13,1% of MTN though a company known as Newshelf 664. This structure is scheduled to unwind on 22 December this year. As a result, a dividend of MTN shares will be declared to the Alpine Trust (AP) beneficiaries on the unwind date. The AT, whose beneficiaries are eligible MTN employees, holds ordinary MTN shares on behalf of Newshelf 664.

MTN and the Public Investment Corporation (PIC) have entered into a Memorandum of Understanding (MOU) that seeks to ensure the orderly unwind of the Newshelf structure and sets out PIC’s role in the new BEE transaction. The MOU is subject to a number of conditions, including shareholder approval.

After the dividend to the AT, the PIC will effectively have all the economic exposure to the MTN shares held by Newshelf. Because the liabilities of Newshelf to PIC match the value of MTN shares held, Newshelf will then have a nominal value.

The MOU stipulates that MTN will acquire Newshelf for a nominal value. It will then settle or acquire all outstanding funding obligations in Newshelf through the payment of R400 million in cash and the issue of approximately 213.9 million shares representing approximately 11.5% of MTN’s issued share capital. MTN will effectively acquire 13,1% of its shares held through Newshelf in exchange for the issue of 11,5% of its capital. The majority of this effective discount will not be retained by MTN, but will be used by MTN to facilitate the new BEE transaction.

It is expected that the BEE Transaction will comprise between 5% and 6% of MTN’s issued share capital. In terms of the MOU, the PIC has undertaken to make available from its equity portfolio up to 6% of MTN’s ordinary share capital for the purposes of the BEE Transaction. Based on the Codes, this translates to about 25% to 30% of MTN’s South African operations. The ultimate size of the BEE Transaction may change depending on market conditions and the extent of reinvestment by AT beneficiaries.

The BEE Transaction will provide an opportunity for the AT beneficiaries to continue their long term relationship with the company by reinvesting a portion of their benefits from Newshelf in the new transaction.

Participation in the BEE Transaction will require an equity investment by participants. The transaction will be designed to provide long term, sustainable benefits to participants and will have a duration of six years.

MTN intends to assist in raising finance for the BEE Transaction. The cost of this assistance is estimated to be less than 0.75% of MTN’s market capitalisation.

In addition, MTN intends to establish an employee share ownership plan (ESOP) that will benefit eligible employees of MTN who do not participate in any of MTN's existing employee incentive schemes.

Says MTN Chairman, Mr Cyril Ramaphosa: “The MTN Group as a South African-based multinational telecommunications company listed on the JSE has been and remains committed to the principles of BEE . We believe these proposals are important for the long term progress of MTN and will facilitate sustained and meaningful BEE participation in the company.”

MTN plans to finalise the BEE Transaction in the first half of 2009, subject to market conditions. Full details of the BEE transaction will be communicated to shareholders thereafter for approval.