South African cellphone provider Vodacom finalised a R7,5-billion deal to bring on board black investors, which it said recently would hit its earnings by R2-billion.

The deal, flagged as one of the largest broad-based black economic empowerment (BEE) transactions so far in South Africa, will transfer 6,25 percent of its local business to black investors and will be funded by equity raised from those investors plus national vendor funding.

Vodacom asserted that the deal would cost about two percent of the value of its South African business or about R2-billion, which would hit its earnings, although it did not specify the period.

"The estimated cost comprises 10 percent entry discount, the fact that we provide notional vendor finance at a very attractive rate and the effects of the dilution on the Vodacom South Africa shareholders," Nadya Bhettay, a corporate finance executive at the company, said on a conference call.

Jan Meintjes, a telecoms analyst at Gryphon Asset Management, posited that the R2-billion impact was in line with what is seen in other major BEE transactions.

"If you take banks for instance, we've certainly seen dilution cost somewhere between three percent and five percent," Meintjes said. "From that point of view that number shouldn't be too scary."

Vodacom said investors included black investment group Thebe Investments and Royal Bafokeng, one of South Africa's richest tribal groups due to a steady stream of royalties from platinum mines. The deal also includes an offer to the public through a vehicle called YeboYethu.

BEE is designed to widen ownership of the South African economy, which is still mainly in white hands 14 years after the end of apartheid, by transferring stakes in major companies to black investors.  Vodacom Group’s Director, Knott Craig posited that the deal is going to be broad based..

He further stressed that, "For the moment there are no talks of any further selling of equity stake to black investors. This is our first BEE transaction. It's a sizable transaction," said Knott-Craig. Vodacom is jointly owned by Telkom and Britain's Vodafone, which is planning to buy an additional stake in the South African company.

Under the BEE deal, the two strategic equity black partners will be allocated 2.81 percent of Vodacom South Africa, while 3,44 percent will be held by black individuals and 93,75 percent will be held by Vodacom Group. Vodacom said its South African staff will also participate in the offer to the public.