It is probably democratic SA’s most successful corporate investment story. Started by Naspers in 1993, MTN went on to create many billionaires, and certainly many more black millionaires than any other such initiative. But fortunes have also been lost as investors have tended to focus on the dividends, rather than governance and sustainability.

They will need to be more vigilant about MTN’s governance this time round. The company is launching an eight-year, R10bn BEE deal in order to improve its empowerment credentials as it closes an empowerment deal started six years ago.

Back then things looked a lot rosier than they do now.

For existing investors it’s not the best of times to be selling shares. At R120, MTN’s share is priced at less than half the R260 you would have paid for it two years ago.

A series of great deals in the first 20 years of its life propelled MTN to the top of investors’ radar screens. The former chief executive, Phuthuma Nhleko, could do no wrong in the eyes of his backers.

Through a US$5.5bn takeover of the Middle East’s Investcom, Nhleko left his Vodacom competitor, Alan Knott-Craig, in the dust. He showed Knott-Craig a clean pair of yellow heels across the African continent and the Middle East. Now Vodacom’s share valuation has caught up again (purely as a result of MTN’s later missteps).

But MTN proved to be as weak on systems and processes as it was strong on deal making. On the acquisitions front it may have cut quite a few corners as well. Corporate governance scandals soon followed in many of its markets.

The alleged bribery of government officials in Iran for a licence was one of the major scandals. And pragmatic deal-maker Nhleko is still mopping up after his former colleague, Sifiso Dabengwa, in Nigeria.

Investors have been feeling it where it hurts most.

The corporate scandals have distracted management, which seems to be lagging behind rivals when it comes to technological innovation.

The pain is not about to go away, even if the damage has already been paid for.

At these prices, it is rather surprising that MTN has managed to avoid being a takeover target. Perhaps an answer for that lack of suitor interest could be found in SA’s regulatory environment. (Who would want communications minister Faith Muthambi or telecommunications minister Siyabonga Cwele deciding on their multibillion-dollar investment?)

Be that as it may, I digress.

The new BEE deal will be facilitated by a 20% discount on the MTN stock needed to launch MTN Zakhele Futhi. The minimum investment is R2 000.

Qualifying investors will pay R20 for each MTN Zakhele Futhi share either through cash, or by rolling their existing MTN Zakhele shares, or both. MTN wants to raise a total R2.5bn equity to effect the deal.

Most existing investors in MTN Zakhele, which will be closing in November, will simply roll over into the new scheme. There’s not much reason why they wouldn’t. They have done very well over the past six years: a R20 investment in August 2010 turned into R145 on capital growth, before falling to the current R70.

Zakhele paid no dividends.

But those who held the listed MTN share did not do as well. Other than the generous dividends they harvested over the period, the share price is back where it was in 2010.

The BEE deal is a great opportunity for the long-term investor. And so is the price of MTN at this point.

The revamped management team is dreaming big. More technology-based financial services companies have been launched. More are on the way. And, of course, MTN’s serial risk-taker, Nhleko, will continue to lurk in the background.

But having been burnt once, minority investors will need to be more on guard now.

The writer owns shares in MTN Zakhele.

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