Tuesday, July 29, 2008

Vodacom - Black Economic Empowerment

Vodacom wants more empowerment

Following the completion of Vodacom's protracted R7.5-billion broad-based empowerment deal, the country's largest mobile provider is hungry for more empowerment, CEO Alan Knott-Craig announced this morning.

According to Knott-Craig, the transaction, as it stands, will bring Vodacom's BEE rating to level four, which will allow the company to participate “meaningfully” in government business. However, he says Vodacom hopes to increase the participation to level three.

Broad-based empowerment is measured using seven pillars, each with a relative weighting, measured on a scorecard. Level four is the minimum requirement for government participation. There are several companies which measure and rate BEE, and there are inconsistencies in this process.

However, Knott-Craig says the company's current rating can be assured. “Our scorecard was relatively strong in many areas before this deal, however, we scored poorly in the equity category.”

Knott-Craig says the next step for the company will be to look at attaining the next level of participation (level three), which will allow it to contribute even more in government. “We still have a lot of work to do on the scorecard rating. In some areas we scored 100% and in others we did not do as well, so there is still room for improvement.”

What to expect

In what could be the largest BEE transaction completed in the SA ICT space to date, the R7.5-billion deal equates to 6.25% interest in Vodacom's operations. This values the company at R120 billion.

“If the public offer is fully subscribed, the equity contribution by participants will be R900 million,” the company explains.

The public offer will open on 30 July and closes on 11 September. At the end of the month, the SA Post Office will have a prospectus detailing the public offer.

Vodacom has stuck with its initial structure, namely: SA staff will participate in 25% and strategic black partners is 45% of the BEE transaction. Royal Bafokeng Holdings and Thebe Investment Corporation are Vodacom's partners in the deal.

Following the completion of the deal, the black public will own 1.89%, employees 1.55% and strategic black partners 2.81%. The balance of ownership of 93.75% will continue to be held by the Vodacom Group.


Black people, black-controlled groups and Vodacom's SA black business partners can participate in the black public offer. Some 14.4 million YeboYethu shares will be available for subscription by the black public.

Of this, 3.6 million YeboYethu shares will be reserved for Vodacom's black business partners who are black entities forming part of Vodacom's SA distribution network and who have been invited by Vodacom to participate in the offer.

All Vodacom South African staff will participate through the YeboYethu Employee Participation Trust (ESOP). The current market value of the ESOP stake is R1.875 billion.

Allocation to employees will be based on percentage of salary, with the lower paid employees getting a higher percentage. It is a condition that 70% of the ESOP must be in black hands and 30% in black women's hands. A further 25% will be held for future employees.

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