Page 12 - MCOM MODEL ANSWER 1

P a g e | 12

Actions

 Implement a blend of satisficing and side payments to reduce the risk of further conflict
 The Group Marketing Director should arrange a press briefing to communicate the rationale

for the SSC decision and the steps taken to mitigate the adverse impact
 Organise a PR offensive to recommit MCOM to CSR in our key markets across Africa by
bringing forward the announcement of new CSR initiatives

 The CFO should incorporate Appendix 6 into the Shareholder Pack ahead of our next AGM
 Develop a training plan for the staff at SSC to equip them with the technical, cross cultural,

language and business skills required to support our managers across Africa
 A better change management strategy needs to be developed for the future.

3rd Priority: Nuclear deal, political risk & strategic uncertainty in Ilania.

We hold 49% in JV-Cellular in Ilania which is our single largest investment in the Middle East

and our best means to expand in the region. The country however has suffered sanctions ever
since we entered, impacting on this investment. Ilania also suffers from hyperinflation and

further political risks in relation to the mooted indigenisation programme which could see us
surrender some or all our stake to locals as well as ethical risks with legal uncertainties. Ilania's
signing of a nuclear deal with the West could see sanctions removed by the end of 2017 giving
us a real opportunity to achieve our strategic ambition in this region. We have 3 strategic

options to respond: 1) Consolidate & expand, 2) Stay the course, 3) Sell & walk away. There is
a complex network of probabilities and scenarios making 1 and 2 tricky and hence calling for a

Decision Tree & the Black Scholes Models. This is the subject of Appendix 7.

Strategy 1: Consolidate & expand

51% of our shareholders have expressed their willingness to sell us an extra 2% holding for

S$2140m which will allow us to gain controlling interest, on condition that all our further pursuits
in the region are structured with and through JV-Cellular. Appendix 7 shows that there is a 70%
chance Illania may comply after meeting the undefined costs and allowing for our 51% share

holding gives an Expected Value (EV) of S$69,544m whilst the 30% chance of non compliance
gives us an EV of S$9,976m with a resulting combined EV of S$77,380m after allowing for the
S$2140m which should be paid to gain control. Furthermore there is an embedded call option

as our controlling interest gives us firm footing to expand in the region, which is the reason why
our co-shareholders are keen to sell these shares to us in the first place. Our Black Scholes
Developed by The CharterQuest Institute for 'The CFO Business Case Study Competition 2016'
www.charterquest.co.za | Email: thecfo@charterquest.co.za