MTN management, staff set for windfall
A multibillion-rand empowerment structure for MTN directors, senior management and other employees will be unwound in the next few weeks, potentially earning each of the group’s top executives a fortune and collectively making 2 300 of the cellular operator’s employees billions of rand.
But there are fears the unwinding of Newshelf 664 and the associated Alpine Trust might lead to a share overhang, potentially depressing MTN’s share price, and to the loss of staff who are beneficiaries of the scheme.
According to the group’s 2007 annual report, Newshelf holds 13,06% of MTN. Newshelf’s shares are held by the Alpine Trust on behalf of eligible employees. The trustees are MTN Group CEO Phuthuma Nhleko and chief operating officer Sifiso Dabwenga, Paul Jenkins, Wendy Lucas-Bull, Zakhele Sithole and former MTN director Irene Charnley.
At Monday morning’s share price of R94,35, Newshelf’s stake in MTN was worth R23bn. Nhleko, who told the FM earlier this year it was “unlikely” he would stay on after his contract expired in June 2010, will benefit handsomely: his 7,92% share of the trust is worth R1,82bn. Dabengwa and finance director Rob Nisbet are no paupers either — the two each have a 5,59% share of the trust valued at R1,28bn apiece.
Analysts point out that the actual values will be much lower as various funding obligations must still be met. The precise extent of those obligations is not clear and MTN refused to provide any assistance or comment to the FM.
“I can only assume the debt obligation is quite substantial,” says one securities analyst, who asks not to be named. “There are so many different funders and financiers, including the Public Investment Corp and the commercial banks.”
The benefits will be distributed only once all debt and equity-related funding obligations have been met, MTN says.
Newshelf originally acquired the shares in MTN from Transnet between December 2002 and March 2003 at an average price of R13,90/share. If debt repayments and other costs are removed from the equation, the value of the investment has appreciated by nearly 600% in six years – and that’s after MTN’s share price pulled back sharply in the wake of the group’s failure to make an acquisition in India earlier this year and the subsequent turmoil in world financial markets. When MTN’s share price peaked at R160 on May 5, Newshelf was worth R39bn.
Even with the decline in the share price over the past six months, the Newshelf 664/Alpine Trust structure has proved to be one of the most financially successful empowerment schemes in post-apartheid SA. It has proved controversial, though, since some senior white staff have also benefited. The trust aims to allocate 75% of the benefits to black staff, MTN says.
Some concerns have been raised that MTN could lose top staffers after the unwinding of Newshelf. But the analyst says MTN may try to extend the scheme, possibly by up to five years, thereby effectively locking in staff. Even if that doesn’t happen, he says he doesn’t expect many top people to leave.
He also says the potential share overhang is limited. “About 3% could end up in the market so I don’t think it will have a massive impact on liquidity.”
What will affect MTN’s share price more in the short term, he says, is the volatility in Nigeria’s currency.
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