WHEN HCI CHAIRMAN Marcel Golding sold that group’s 5% stake in Vodacom to fund free-to-air television station, most fund managers sold their shares back to HCI as part of a massive buyback at 237,6c/ share.

Most held HCI for its exposure to Vodacom and doubted that – indeed, the enlarged HCI group – would be the success it has since become. Now Golding`s getting back into telecoms.

OK, so it isn`t a Vodacom. However, Golding is clearly betting on the continued growth of SA’s cellphone market by consumers hungry for new devices and functionality in the world of converging telecoms.

Golding and SA’s former ambassador to the US, Franklin Sonn, have teamed up to form a “broad-based” black empowerment consortium that will hold 19,3% of cellular supplies and services company Celcom Group after its listing on the JSE`s AltX later this month. Golding will be non-executive chairman of Celcom Group, with Sonn a non-executive director.

Celcom CEO Stefano Brachini says a colleague introduced him to Golding shortly after HCI had sold its stake in Vodacom. “He liked our vision and our business,” says Brachini, “and indicated that he`d like to help set up the company`s empowerment component.”

To attain the 25,1% empowerment ownership required by the ICT Charter, Celcom founders Brachini and his brother Luca will also sell 6,6m (a 3,2% stake) of their shares to empowerment partners after listing, with another 2,6% held by a staff trust.

The brothers will hold equal halves of 36% in the company, but Brachini says it will be controlled by a voting pool arrange- ment consisting of the empowerment component as well as director and management stakes in the company totalling 65%.

Celcom will raise R23m through a private placement at R1/share, and Brachini says, from the interest already expressed, the offer is going to be oversubscribed. Metropolitan Life is the only major institution that has agreed to take up shares, while for the most part Celcom has approached mid-cap asset managers, hedge funds and retail money managers as part of its roadshow.

Brachini and brother Luca – the MD – founded the company shortly after the birth of SA’s cellphone industry in 1994 as a supplier ” of equipment and accessories. They’ve subsequently added virtual payment systems (pre-paid airtime), cellphone service packages for mostly smaller corporates, hardware/technology for data transfer over mobile networks, plus a franchise retail component. Brachini says that while the pre-paid airtime business had the potential to add significant revenue going forward, it was low margin business.

The R23m being raised will go towards the already-secured acquisition of 13 Vodacom retail franchise stores. Brachini says the stores enable it to earn annuity income from securing new customers. Unlike a service provider, it doesn`t conduct client billing or operate customer service centres. For that it earns a smaller fee per subscriber acquired but doesn`t have the commensurate cost of fully servicing a client, Brachini says.

Celcom has relationships with Vodacom, MTN and Cell C and is an authorised distributor for Nokia, Motorola, Sony Ericsson and Samsung,

Brachini says the listing took longer to kick-start than expected, due to various regulatory processes. However, it appeared to be “in the right place at the right time” concerning SA’s booming equity markets.

Source: Finweek – Belinda Anderson