Vodacom broadens R7.5bn BEE deal

Johannesburg, 11 Mar 2008

The country's largest cellular operator, Vodacom SA, is to open participation in its R7.5 billion black economic empowerment (BEE) deal to black South Africans.

In a statement yesterday, Vodacom Group said it was in the process of structuring a "unique and complex" BEE transaction.

This deal would enable it to achieve the objectives set out in the Department of Trade and Industry's Broad-Based Black Economic Empowerment Codes of Good Practice and the draft ICT charter. Both require 30% of a company's ownership to be in black hands.

Much of what was said in the statement has been announced by the cellular company before, commented analysts. However, the addition of public participation was "particularly interesting", they said.

Under pressure

Vodacom's BEE aspirations have been the subject of much media speculation.

In recent weeks, the deal has been accused of stalling; coming under political pressure to remove former Scorpions boss Bulelani Ngcuka; profiting the "usual suspects"; and failing to include the Communication Workers Union and employees in the consultations.

One investor analyst, who cannot be named, says the inclusion of a public offering was probably a measure to pacify political players and the community at large.

"This deal has become quite messy in terms of public relations. And no doubt there has been political pressure. Adding a public participation portion to the deal could help it to re-establish some warm sentiment among consumers," he says.

Heading to bourse

Another "interesting" aspect of the addition of public participation is how the company expects to give new shareholders exercising powers, he comments.

"To me, this is an indication that the company is looking to list its SA holdings in the short-term. Without a listing, the public shares will be very difficult to value and for grass-root shareholders to exercise fairly. I would suggest we can expect to see Vodacom listed within the next couple of years or so," he speculates.

Another investor analyst reiterated these statements.

Awaiting detail

Vodacom's statement shed little additional detail on the BEE transaction. At this stage, neither the envisioned size of the total BEE stake is known, nor how this stake will be split between co-shareholders Telkom and Vodafone.

All that is known is that Vodacom SA employees will receive a 25% stake of the total BEE deal.

Nevertheless, Vodacom Group CEO Alan Knott-Craig says the transaction is "well on track".

"It will be broad-based, including our staff, the public and strategic partners who contribute meaningfully to our business. We expect to announce the full details of the transaction in the third quarter of this year."

Apart from Vodacom SA staff and the public offering to black South Africans, the company expects to have participation from its local business partners and "strategic shareholders". Vodacom says the strategic shareholders include established broad-based BEE groupings.