Bharti, MTN may revisit terms; extend scope of talks


Underlining the concerns of some key MTN shareholders, Bharti and MTN said separately on Monday the structure and terms of the potential transaction may be adjusted to reflect further discussions between the parties. “As discussions between the parties regarding the potential transaction are continuing, both parties have agreed to extend the exclusivity period,” Bharti said.

Bharti and MTN revived merger talks in May, a year after previous talks broke down over who would control a merged entity. MTN held talks with Bharti rival Reliance Communications in May 2008, but these also failed. “This is the first clear indication from Bharti that the price could be increased and deal may not be in the same form,” said Sanjay Chawla, a telecom analyst with Mumbai-based brokerage Anand Rathi Financial Services.

Stock part
“They have room to increase the stock part under India FDI (foreign direct investment) rules. But MTN may ask for raising the cash too. It may well end up as a change in both,” he said. A merger of Bharti and MTN, the top mobile operators in both countries, would create an emerging markets giant with more than 200 million customers across India, Africa and the Middle East.

The exclusive talks over the deal, which would see Bharti and MTN pay cash and stock for a stake in the other, were due to end on July 31. Earlier, sources had told Reuters the talks were likely to be extended by at least two to three weeks. Under the initial terms, MTN and its shareholders would take 36 per cent economic interest in Bharti and the Indian firm would end up with 49 per cent of MTN. A combined entity would be the third-biggest mobile operator based on subscribers, behind China Mobile and Vodafone, although its annual sales of $20 billion would be dwarfed by China Mobile’s $60 billion and Vodafone’s $65 billion. Analysts say Africa being the last of less-penetrated markets in terms of mobile growth presents a big opportunity for global mobile firms, who are seeing cut-rate competition in saturated markets and are facing falling call tariffs.

The deal would give both Bharti and MTN access to new markets ripe for growth, while a full merger, the eventual aim of the talks, would yield cost savings, allow for technology sharing, and provide the financial muscle for more expansion, analysts said.

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