Vodacom announces details of its R7.5bn broad-based BEE transaction

Vodacom is pleased to announce the details of its broad‐based BEE transaction. This follows the company's announcement of its intention to implement a BEE transaction on 10 March 2008 and the announcement of the preferred strategic partners on 24 April 2008.

The transaction is very broad‐based including a public offer to the black public, black groups and Vodacom black business partners as well as participation by Vodacom's employees and two broadbased strategic partners, Royal Bafokeng Holdings ("RBH") and Thebe Investment Corporation ("Thebe"). The transaction is one of the largest broad‐based BEE transactions in the South African information and communications technology industry.

The transaction value of R7.5 billion equates to an effective 6.25% interest in Vodacom's South African operations, Vodacom (Pty) Ltd (‘Vodacom SA'). This values Vodacom SA at R120 billion. If the public offer is fully subscribed, the equity contribution by participants will be R900 million.

Alan Knott‐Craig, CEO of Vodacom Group commented:

"We are immensely proud to be announcing the details of our broad‐based BEE transaction. This transaction underscores our commitment to achieving sustainable, broad‐based BEE ownership of Vodacom SA. We are firmly committed to the process of achieving transformation in South Africa and specifically ensuring that a broad spectrum of black South Africans and black women benefit."

As previously announced, Vodacom SA staff will participate in 25%, and the strategic black partners 45%, of the BEE transaction. Assuming that the public offer is fully subscribed, the black public will participate in 30% of the BEE transaction. On that basis, ownership in Vodacom SA post the BEE transaction will therefore be black public 1.89%, employees 1.55% and strategic black partners 2.81%. The balance of ownership of 93.75% will continue to be held by Vodacom Group.

The black public offer is being made through YeboYethu Ltd, which will hold shares directly in Vodacom SA.

Black people, black controlled groups and Vodacom's SA black business partners ("black public") can participate in the black public offer. 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 SA to participate in the offer.

The public offer opens on 30th July and closes on 11th September 2008. A prospectus setting out the details of the public offer will be made available at most South African Post Office branches from 30th July.

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 million.

As with the black public, the staff participation will be held in YeboYethu Ltd. 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. 75% of the allocation is for current employees with 25% for future employees.

No upfront cash contribution is required of the employees. No dividends will be received during the term of the ESOP of seven years, which will go towards the repayment of the notional vendor finance.

Alan Knott‐Craig said:

"Vodacom recognises that employee participation is integral to ensuring sustained business success and enhancing our track record of retaining and developing our employees. We were thus committed to spreading a significant portion of the benefits of the BEE transaction amongst our South African staff."

Vodacom went through a robust and objective partner selection process to determine the choice of the preferred strategic black partners. One of the criteria was that the partners themselves should be broad‐based and be able to contribute meaningfully to the business. Based on this process, Vodacom announced the selection of RBH and Thebe as the two chosen partners.

RBH is the primary investment vehicle of the Royal Bafokeng Nation, a 300,000 strong broad‐based black community in the North West province. Thebe is one of the pioneers of broad‐based BEE in South Africa. Its main shareholder, the Batho Batho Trust, is a community based organisation established to promote the social and economic development of black people and women.

Both RBH and Thebe will hold their interest directly in Vodacom SA. Of the 2.81% stake held by the strategic partners in Vodacom SA, RBH will hold 1.97% and Thebe 0.84%.

RBH and Thebe will contribute total equity of R540 million for their stakes which have a current market value of R3,375 million. The strategic black partners will have immediate voting rights and will receive 50% of the dividends on the initial investment for the first seven years.

Niall Carroll, Chief Executive Officer of Royal Bafokeng Holdings said:

"Telecommunications is one of the key growth sectors we have targeted in our investment diversification strategy. We are extremely pleased to have forged this valuable association with a sector leader of Vodacom's stature".

Vusi Khanyile, Chairman of Thebe Investment Corporation said:

"We are very excited to participate in Vodacom's broad‐based equity transaction. We look forward to working with Vodacom's management team. Vodacom's BBBEE transaction embodies the spirit of economic transformation in the mainstream economy as shareholders, employees and entrepreneurs".

Alan Knott‐Craig concluded:

"We welcome Royal Bafokeng and Thebe to our business. We are certain that the partnership will reap rewards for everyone. We look forward to their contribution to the business in the future."

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