/ 10 March 2008

Vodacom in process of structuring R7,5bn BEE deal

South African mobile telecommunications group Vodacom and its shareholders, together with Rand Merchant Bank, a division of FirstRand Bank, are currently in the process of structuring a R7,5-billion black economic empowerment (BEE) transaction, it said on Monday.

The Vodacom group, in which fixed-line operator Telkom owns a 50% interest, said that its BEE transaction was “well on track”.

The deal is in line with its empowerment objectives to transform the company’s equity ownership to reflect the demographics of South Africa through the establishment of a broad-based, inclusive empowerment shareholding, as well as to broaden ownership in Vodacom among its employees and achieve maximum compliance with Department of Trade and Industry (DTI) codes.

“It will be broad based, including our staff, the public and strategic partners who contribute meaningfully to our business,” said Vodacom CEO Alan Knott-Craig.

It said that it was currently running a robust and objective partner-selection process to determine the composition of the BEE participants.

All black South African citizens — as described in code 000 of the DTI codes — and black-owned entities would be eligible to participate in the BEE transaction through a public share offer.

It added that its strategic participants grouping would play an important role in furthering Vodacom’s transformation, skills and capacity-building programmes.

It said that the short-listed parties had been provided with an indicative term sheet, and based on submissions received, Vodacom would determine the composition of the strategic participants and enter into negotiations.

Vodacom employees will participate in 25% of the BEE transaction through an employee share-ownership plan (ESOP).

According to the group, the BEE transaction will be financed through the optimal combination of equity and substantial facilitation from Vodacom through vendor funding.

The public participants and strategic participants will be required to provide a level of unencumbered equity, which will be supported by appropriate Vodacom facilitation. The ESOP will be funded entirely through Vodacom facilitation.

BEE participants will be subject to restraint principles in line with market norms.

The group is expecting to make a further announcement in the third quarter of 2008 after negotiations with strategic participants will be finalised.

Implementation of the BEE transaction is expected in the fourth quarter of 2008. — I-Net Bridge