MTN Group CEO Phuthuma Nhleko has every reason to be proud of his company's achievements over the past decade. He presides over SA's most profitable mobile phone company and Africa's largest cellphone operator and heads the largest black-owned firm on the JSE Securities Exchange.
With market capitalisation of about R53bn in early March, MTN was valued at R13bn more than Telkom. Impressive, considering that Telkom has the monopoly of fixed-line services and owns 50% of cellphone rival Vodacom.
Using market capitalisation as the measure, Nhleko is the most powerful executive director of a JSE-listed company, according to Empowerdex. Telkom CEO Sizwe Nxasana is in second spot on the Empowerdex ranking of most powerful black CEOs and executive chairmen.
Nhleko, who, as executive chairman of Worldwide Africa Investment Holdings (WAIH), astutely orchestrated his move to MTN in May 2002, did not wait long to make his mark.
In December 2002 Nhleko stunned the market with a management buy-in of MTN. This is the biggest black economic empowerment (BEE) acquisition to date - R4,3bn. In the process, he has entrenched his stake as the group's most influential shareholder.
With the recent unbundling of Johnnic's shareholding, MTN Group is now 18,7% owned by staff and management through Newshelf 664. The National Empowerment Consortium (NEC), a coalition of broad-based black business and labour empowerment groupings, holds an estimated 8,8% interest and the remaining 72,5% of shares are free-float and held by local and international institutional and retail shareholders.
The 18,7% bought by Newshelf originally belonged to Transnet, which owned 23,7% of MTN. Government sought to find a foreign buyer for the stake but in the depressed global telecom market of the time this proved difficult.
The Newshelf deal was groundbreaking in that 309m shares (18,7%) were sold to management and staff. Government has since sold its last remaining stake in MTN to Umthunzi Telecoms Consortium, led by Sandile Zungu, a high-profile businessman and chairman of state-owned arms group Denel, for about R2,5bn.
The Newshelf shares are held in a trust for the benefit of about 2 400 permanent MTN SA staff and eligible senior staff members in the African operations. Benefits will vest with staff over the six-year funding period, and are not tradable before all funding commitments are met. About 70% of staff beneficiaries of the trust come from previously disadvantaged backgrounds.
But there has been controversy. Senior management is set to benefit from a 70% allocation, while only 30% is allocated for employees. MTN management says that is far more beneficial to general staff than typical management buyouts (MBOs).
The deal is being funded in three tranches: R690m through bank debt; R1,5bn through a Transnet-guaranteed bond; and R2,1bn through the Public Investment Commission (PIC), which manages most of government's and the parastatals' pensions.
Besides empowerment shareholding, MTN also has a comprehensive BEE policy. In SA the company has simplified all tender processes and set up tender advice centres to assist small to medium-sized enterprises.
All suppliers that intend to do business with the MTN Group are assessed according to a supplier-assessment evaluation that takes into account black ownership, management, skills transfer, affirmative action practices and other BEE initiatives.
During the 2000/2001 financial year, designated BEE suppliers constituted about 60% of the group supply chain in SA and supplied more than R582m worth of services.
MTN SA achieved an employment equity rate of more than 60%. Working according to a five-year plan, MTN is confident of achieving its target of 75% employment equity by next year.
On average, MTN SA spends about 3,8% of payroll on training - higher than the international industry average of 3,2%. The company also has invested many millions of rand in social responsibility projects (including school connectivity, science centres, arts & culture and sports development) and in helping to build sustainable communities.
In terms of its licence, MTN SA had to install 7 500 community payphones in underserviced areas countrywide - not much, considering MTN's phenomenal growth since 1994. To date, MTN has installed more than 8 000 community payphones. By the end of last year MTN had 6m capable subscribers (active in the past three months) in SA, and another 2,9m in the rest of Africa.
MTN has recently revised its community payphone business model. It now installs phoneshops and telecentres, each equipped with phones. The phoneshops and telecentres stimulate rural entrepreneurship. MTN's community services division also provides phoneshop operators with skills training.
MTN sees this as an opportunity to contribute to the creation of jobs for the unemployed, especially women, and 3 800 retailers have already benefited from the initiative.
Since its launch in 1994 MTN has expanded into Swaziland, Rwanda, Uganda, Cameroon and Nigeria, which is by far its most profitable market.
