Yebo Yethu still sizzles

THE heady days of meteoric growth appear to be a thing of the past for cellular giants as market saturation and stiffer competition lessen their ability to extract substantial profits from customers.

Last month, on the day it reported a pedestrian 2.8% rise in earnings, Vodacom announced a bid to acquire Neotel, the country’s second fixed-line operator, in a R7-billion deal.

Cell C promptly announced it was seeking to block the merger.

Yet despite the more pedestrian outlook for Vodacom its share price continues ever upward, with only an occasional dip reflecting market jitters. This means that black investors who bought into Vodacom’s black empowerment scheme, Yebo Yethu, have seen the value of their shares increase too.

The scheme, which trades over the counter rather than on the JSE, was launched in July 2008 offering investors the chance to get in at R25 a share. When the Yebo Yethu shares began trading in early February, they were selling for R49 a share.

Initially, trading was sluggish, but Yebo Yethu picked up in early April, spiking at a high of R80 a share in May, before falling back to R65.

Overall, Yebo Yethu holds 3.44% of Vodacom SA, which is valued at R5.7-billion. After allowing for debt funding of R3.2-billion, analysts reckon that Yebo Yethu is worth about R94. Once you apply a “liquidity discount” of 40% because of the restricted trading, the value is reduced to R56.

At the end of next week, Yebo Yethu will also pay out a 56c a share dividend, showing how black investors who bought in early already enjoy tasty returns.