MTN empowerment deal flops

MTN’s decision to have a share placement at the same time as its new black economic empowerment (BEE) scheme was just one of several reasons the BEE scheme flopped.

This was the view of a BEE fund manager on Tuesday after the cellphone group announced it had raised R2.3-billion through the placement of 21million shares. The money will be used to pay MTN Zakhele shareholders who are cashing in.

Although the placement volume was small, it was another factor contributing to the generally bearish sentiment around MTN and helped to explain why the new MTN Futhi scheme failed to raise the modest R2.5-billion targeted.

BEE schemes are not meant to be free, but they are meant to be sufficiently attractive to ensure success. Even the recent ridiculously overpriced Dis-Chem initial public offering was seven times oversubscribed.

The take-up of the MTN Futhi offer fell R500million short of its R2.5-billion target – a 20% shortfall.

Analyst Riaz Gardee described the latest MTN BEE scheme as far less promising than the group’s previous initiatives. “Investors will have to consider MTN’s prospects over the next eight years as well as the ability of the management team to deliver in the current phase of the company’s life cycle,” said Gardee, alluding to the much tougher operating environment.

The scheme was rushed, it was unnecessarily complicated and it was badly priced, said the fund manager.

But this year, MTN continued to battle to persuade the Nigerian government not to impose a staggering $3.9-billion fine for issuing unregistered SIM cards.

Share price volatility throughout the year marked it as an inappropriate time to launch a new BEE scheme.

That the MTN board did not opt to roll over the existing MTN Zakhele scheme for an extra year or two was probably the first mistake.

Those who could afford to and were prepared to convert from MTN Zakhele into MTN Futhi were faced with a dauntingly complicated process.

It may be the MTN board is still too focused on its Nigerian troubles to give its South African transformation requirements the necessary attention. MTN did not respond to requests for comment on the MTN Futhi take-up. — BDLive