MTN boss’s R1bn bet

Nh­leko’s to­tal ex­po­sure in mo­bile provider jumps to R29bn

Finweek English Edition - - Companies & Markets - SIKONATHI MANTSHANTSHA sikonathim@fin­

BACK IN MAY 2006 – when cell­phone op­er­a­tor MTN was trad­ing at around R50/share – CE Phuthuma Nh­leko com­mit­ted R245m of his own cash in a for­ward pur­chase con­tract on more than 4m MTN shares. That was a bold step that showed un­ri­valled con­fi­dence and which earned him the re­spect of the in­vest­ing com­mu­nity while many doubted his wis­dom. The mar­ket proved him right.

Nh­leko has done it again. Last week he com­mit­ted more than R1bn to MTN’s shares. The com­pany dis­closed to the mar­ket that Nh­leko had en­tered into a “re­struc­tured” for­ward buy­ing agree­ment with a com­mer­cial bank in re­spect of 4,1m shares at an op­tion price of be­tween R122,34 and R129,09/ share. The op­tions ex­pire in Novem­ber next year. An­other trans­ac­tion in which Nh­leko bought a call op­tion at R102,57/share and sold at R150/share in 5m shares ex­pires in March 2009.

His buy­ing gives Nh­leko a to­tal min­i­mum ex­po­sure of R1,02bn on the 9,1m shares – an av­er­age price of R111,54/share against the cur­rent price of R101/share. The put strike price av­er­age is R140,52/share on both trans­ac­tions, while the sale price would be R150/share on the March 2009 op­tion. Nh­leko se­cured him­self a for­ward price of R98,25/share on the Novem­ber 2009 leg of the op­tion.

The size of the trans­ac­tions again ce­ments Nh­leko’s po­si­tion as the largest in­di­vid­ual share­holder in the com­pany he leads. Should he set­tle and take de­liv­ery of all the shares, Nh­leko will be a proud owner of 28,6m shares (as at end-De­cem­ber 2007 he in­di­rectly owned 19,4m MTN shares) cur­rently worth R29,1bn. Com­pare that with MTN’s mar­ket cap­i­tal­i­sa­tion of R193bn to talk about “skin in the game”.

As men­tioned last week, David Rivkind and Dean Suntup, of Blue La­bel Tele­coms, have be­come the usual sus­pects on the buy­ing side of the direc­tors’ deal­ings ta­ble. They are both re­spec­tively chief fi­nan­cial of­fi­cers of the hold­ing com­pany and a ma­jor sub­sidiary. For four con­sec­u­tive weeks now Rivkind and Suntup have been buy­ing shares in the 500c range. Last week they put a com­bined R9,4m in Blue La­bel’s shares (av­er­age: 563c/share), tak­ing their re­spec­tive share­hold­ings to more than 3,5m each.

Af­ter list­ing in Novem­ber last year at 675c/share, Blue La­bel briefly went as high as 929c be­fore em­bark­ing on a steady slump to a low 400c/share in the first week of Oc­to­ber.

So why are Rivkind and Suntup buy­ing at those lev­els? “Both of us weren’t ven­dors when the com­pany was put to­gether prior to the list­ing,” says Rivkind. They didn’t re­ceive any shares at list­ing ei­ther. Rivkind says they’re buy­ing into Blue La­bel “to align our in­ter­ests” with the other board mem­bers. “The share of­fers real value at th­ese lev­els,” says Rivkind.

With op­er­a­tions in In­dia, the Demo­cratic Repub­lic of Congo, Mozam­bique and now Mex­ico out­side the SA mar­ket, Rivkind sees “only good things” go­ing for­ward. “We an­tic­i­pate growth in the cell­phone and pre­paid air­time dis­tri­bu­tion mar­ket and we’ve aligned our­selves with that growth.”

Blue La­bel’s direc­tors weren’t the only buy­ers of sig­nif­i­cance over the past week. In fact, they were only some of many who saw the buy­ing op­por­tu­ni­ties of­fered by the crash­ing eq­uity mar­kets. With the ex­cep­tion of only two sales worth R650 000, the net R26m pur­chase (ex­cept Nh­leko’s op­tions) was again a vote of con­fi­dence and a case of see­ing op­por­tu­ni­ties while the rest are fear­ful.

A com­bined R10m buy by direc­tors of both syn­thetic fu­els pro­ducer Sa­sol and casino and re­sort op­er­a­tor Sun In­ter­na­tional were the other ma­jor trans­ac­tions in the week. Sa­sol’s Chris­tine Ra­mon and a di­rec­tor of one of the com­pany’s sub­sidiaries were re­spon­si­ble for R5,9m of that.

Mak­ing the call. Phuthuma Nh­leko

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