Who is buying MTN stake?

Johannesburg, 20 Nov 2002

An intriguing cautionary announcement and a dearth of information today had telecommunications analysts speculating about the future home of a 20% stake in MTN, without much consensus emerging.

MTN yesterday said it had been informed "that a major unlisted shareholder is in the process of negotiating the sale of its shareholding in the MTN Group". The sale, it said, would not result in an offer to minority shareholders.

The company is scheduled to present its financial results on Tuesday and is in a closed period, and MTN officials could not be drawn to comment further.

However, the shareholding it refers to is clearly that held by Ice Finance BV, a Dutch company closely associated with finance group JP Morgan. Ice acquired 20% of MTN in January when parastatal Transnet entered into an asset-backed financing deal. Transnet sold Ice the stake for $475 million but retained the right to vote with regards the shares and the ownership of any dividends due.

Under the agreement, Ice cannot sell the stake without approval of both Transnet and Johnnic, another major shareholder. If it is sold for more than the initial $475 million, Transnet is to participate in the upside.

At the time, the government pledged to find a final home for the stake by mid-2003 and said it would enter a competitive bidding process to find the right buyer.

However, the telecommunications market has not yet recovered as was hoped at the time and the MTN share price is currently 30% below the price Ice paid for its stake, and international investors are not rushing into the sector.

Some analysts today concurred with speculation that the current negotiations may be with MTN management planning to buy the stake. Others believed that the government, through the Department of Public Enterprise, would rather continue to look for a foreign strategic partner.

Johnnic Holdings was at one time considered a likely buyer, especially after it entered into a voting pool agreement giving it pre-emptive rights over much of the Transnet holding. A new buyer will not be bound by the agreement, which currently gives Johnnic full control of the MTN board. But Johnnic has given no recent indication of interest in the stake, still worth nearly R4 billion.