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WILL MTN ESWATINI FALL TO FOREIGNERS?

30/12/2018 06:44:00 BY WELCOME DLAMINI

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MBABANE – If the Joint Venture Agreement that establishes MTN Eswatini is anything to go by, then the mobile telecommunications company risks being foreign-owned.

Having been locally-owned since inception in 1998 by virtue of the then Swaziland Posts and Telecommunications Corporation (now Eswatini Posts and Telecommunications Corporation) holding an initial 51 per cent stake that later became 41 per cent to date, there is now a possibility of MTN Holdings becoming the majority shareholder of the company.
Following the decision by the regulator – the Eswatini Communications Commission (ESCCOM), that EPTC should sell its stake in MTN Eswatini by June 30, 2019, MTN Holdings has the opportunity to lay its hands on part of these shares and increase its stake from 30 per cent to a majority 42.3 per cent.

OFFER THE SHARES
The Joint Venture Agreement (JVA) dictates that EPTC has to offer the shares to the remaining shareholders of the company, these being MTN Holdings, Swaziland Empowerment Limited and the Esteemed Shareholder. The shares have to be offered to the remaining shareholders pro rata, meaning in accordance with the shareholding they have in the company. Since MTN Holdings holds 30 per cent shares in the company, it means that it would be entitled to purchase the same amount of the 41 per cent that EPTC has to sell, which would have to be 12.3 per cent.

SEL, on the other hand, will also be entitled to buy 19 per cent of the 41 per cent, which would have to be 7.79 per cent and that would translate its entire shareholding to 26.79 per cent.
The Esteemed Shareholder, meanwhile, will be entitled to purchase 10 per cent of the 41 per cent, which would have to be 4.1 per cent, therefore increasing his stake to 14.1 per cent. Calculated at the latest share value (Friday December 28 at 7:15pm), MTN Eswatini is worth around E8.8 billion, as the MTN Group share value was at E88.06 a share. Because MTN Eswatini is made up of 100 000 000 shares, EPTC’s 41 per cent translates to 41 000 000 shares that are worth at least E3.6 billion. For MTN Holdings to acquire the 12.3 per cent of EPTC’S 41 per cent, it would come at a cost of around E440 million.

SEL would have to fork out around E280 million to get 19 per cent of EPTC’s 41 per cent while the Esteemed Shareholder would have to part with around E148 million to acquire 10 per cent of EPTC’s 41 per cent. A key player in the local telecommunications industry said it would not make economic sense for EPTC to sell its shares to MTN Holdings because that would mean money would be driven out of the local economy. “Currently the shares are held by EPTC and therefore the money circulates within the local economy. That status quo should be maintained. The shares belong to government and the focus should be on selling them to a local company. The shares are held by EPTC and were circulating in the local economy so that shouldn’t change. But it is the shareholder who will offer the ultimate guidance,” said the prominent industry player.

The key stakeholder noted that MTN Holdings has a huge financial muscle and can readily afford to purchase the entire 41 per cent held by EPTC if given the chance.
MTN Eswatini Acting Managing Director Sibusiso Nhleko did not respond to a WhatsApp message enquiring if MTN Holdings would be interested in buying the EPTC stake and what was their take on the regulator’s decision regarding the JVA.
The blue ticks on the WhatsApp message indicated that he had read it. He also did not respond to a phone call that was made to him.
SEL Company Secretary Makhosazana Mhlanga said they would consider the issue of buying the shares once they had received a form

al letter of invite from EPTC.
“At the moment there is nothing formal we have received,” she said.
EPTC Managing Director Petros Dlamini said they were yet to report to the shareholder (government) pertaining the regulator’s decision.
He said until that happened, the issue of the shares remained confidential. He, however, confirmed that the process of disposing of the shares had not yet begun.

“Once the process commences, shareholders will meet and decide on the evaluation of the company. We are not privy and we cannot talk about the shares publicly because we have to protect the integrity and confidentiality of the company. But we will make a market evaluation of the company,” Dlamini said.

Principal Secretary in the Ministry of Information Communication and Technology Maxwell Masuku had not responded to a text message sent to him on Thursday.
The JVA states that if a shareholder (‘the offeror’) wishes to sell its shares, such offer shall be in writing and delivered to the secretary of the company at the company’s registered office for the time being.
“The secretary of the company shall forthwith thereafter deliver the offer to all the offerees,” reads part of the JVA.

OFFER IRREVOCABLE
The offer shall be irrevocable and open for acceptance by the offerees for a period of 30 days following the date of receipt of the offer by the offerees. It is stipulated in the JVA that if any of the shareholders does not accept the offer or does not accept the offer in respect of all the shares offered to it, the shareholder who has accepted the whole of such offer shall be entitled to, within 21 days after the expiry of the first period, accept the offer in respect of the shares offered to the declining shareholders.
This should be at the price and on the same terms and conditions, stated in the offer rateably in proportion to the declining shareholders respective holdings of ordinary shares in the company or in such other proportions as may be agreed upon between them. This procedure shall be repeated as often as is necessary until all the shares forming the subject matter of the offer have been acquired or until no accepting shareholder remains who is willing to accept the declined offer in whole.

This simply means that should SEL and the Esteemed Shareholder fail to buy the EPTC shares they are entitled to buy, MTN Holdings is rightfully entitled to buy these shares. If this was to happen, it would lead to MTN Holdings owning a 71 per cent stake in MTN Eswatini. However, if MTN Holdings, SEL and the Esteemed Shareholder all fail to purchase EPTC’s 41 per cent, the latter shall be entitled, within 60 days after the expiry of the first period or second period, as the case may be, to sell all (and not part only) of the shares which form the subject matter of the shares to a third party.

CONDITIONS NOT FAVOURABLE
The price of the shares should be not be lower and the terms and conditions not more favourable to the third party than those at which the other shareholders were entitled to purchase those shares.
If an offer has been made to EPTC by a bona fide third party, it shall be accompanied by a written memorandum setting out the price and all other terms and conditions that have been offered to EPTC orally or a true and complete copy of any written offer made to EPTC.