While Vodacom is moving ahead with its black economic empowerment (BEE) deal, its advisors say no definitive decisions have been made.
An analyst comments the deal should benefit as many people as possible as Vodacom "touches the lives of everybody". He fears an empowerment partner will be selected only to add "credentials and clout" to the company.
CEO Alan Knott-Craig says the company has received several applications for participation from BEE entities. Management, tasked with inviting applications, hopes to submit its proposals to the board in March. "All indications suggest the size of the transaction will be in the vicinity of R7.5 billion."
Last year, Vodacom said it would sell around R7.5 billion of its equity to an empowerment partner, which would allow it to meet government's equity empowerment requirements. Knott-Craig said at the company's interim results the company would finalise an empowerment deal before the end of this year. The deal, he said, would be in line with the ICT charter.
Unanswered questions
Rand Merchant Bank, which is advising the cellular company, says Vodacom's board and shareholders are still considering their options. Vodacom is jointly held by Telkom and UK-based Vodafone.
Corporate finance executive Leon von Moltke says there has been no decision as to the percentage of the deal, the partners, structure or other financial aspects. So far, the only definitive aspect of the deal is that it should result in a balance between being broad-based, involving strategic partners and empowering staff.
The final rand value has also not been determined, he says. The ICT charter, which can only be gazetted after government's codes of good practice are gazetted in February, proposes a cut-off value of either 30% of equity, or R7.5 billion, whichever is the larger amount. He adds deals of this size generally take a long time to finalise.
Analysts say R7.5 billion equates to between 7% and 12% of Vodacom's share capital, assuming that it is discounted. Vodacom is currently valued at between R90 billion and R100 billion.
Safety in numbers
Some market commentators say a deal of this size would probably require several partners and quite a few financial partners. Most expect both Telkom and Vodafone to dilute their holding, as neither would be comfortable with the other party as a majority shareholder.
Vodacom's BEE deal is expected to be one of the larger deals in SA and one of the largest deals the country will see this year. One analyst hopes the benefit from the deal is not limited. "There's been too much of getting known BEE partners for the sake of complying and if it's just the usual suspects, what's the point?"
The analyst notes that financial institutions are more comfortable lending to familiar names. However, he says, banks would be willing to lend to any player, considering the inherent security of Vodacom shares.
Possible contenders could include Nkenke Kekana, a former Telkom executive; Mandla Langa, ex-chairman of the Independent Communications Authority of SA; S'bu Mngadi, previously from Cell C; and Andile Ngcaba.
Vodacom's previous BEE deal, with HCI, took place in October 1996 when the empowerment partner bought a 5% stake for R118 million. Six years later, the BEE company sold its stake for R1.5 billion.
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