MTN will have rights to raise economic interests in Bharti

As per the exploring agreement, MTN and its shareholders would acquire an approximate 36 per cent economic interest in Bharti, of which 25 per cent would be held by MTN with the remainder (11 per cent) held directly by MTN shareholders. MTN would also have certain rights to increase its economic interest in Bharti in future, MTN said in a emailed statement.

Bharti would acquire an approximate 49 per cent shareholding in MTN. Bharti and MTN have agreed to discuss the potential transaction exclusively with one another until 31 July, 2009.

The transaction, if materialises, would create, a 20 billion dollar behemoth on a subscriber base of 200 million.

"The potential transaction addresses our strategic imperative of becoming one of the preeminent emerging market telecom companies with leading positions in India, Africa and the Middle East, with no overlapping footprint," MTN CEO Phuthuma Nhleko said in a statement.

Bharti CMD Sunil Mittal said: "We are delighted at the prospect of developing a partnership with MTN to create a telecom powerhouse in emerging market. Both would stand to gain from sharing each other's practices in addition to savings from enhanced scale."

Under the scheme of arrangement, MTN would acquire about 25 per cent post-transaction economic interest in Bharti for an effective consideration of approximately USD 2.9 billion in cash and newly issued shares of MTN equal to approximately 25 per cent of the currently issued share capital of MTN.

Bharti would acquire approximately 36 per cent of the currently issued share capital of MTN from MTN shareholders for a consideration of ZAR 86 in cash and 0.5 newly issued Bharti shares in the form of Global Depository Receipts for every MTN share acquired.

Each GDR would be equivalent to one share in Bharti and would be listed on the Securities exchange operated by JSE Limited.

Bharti would have substantial participatory and governance rights in MTN enabling it to fully consolidate the accounts of MTN, the Johannesburg-based company said.

MTN would continue to be listed on the securities exchange operated by JSE Limited and would be the primary vehicle for both Bharti and MTN to pursue further expansion across Africa and the Middle East.

At the same time Bharti would be the primary vehicle for both Bharti and MTN to pursue further expansion in India and Asia. The implementation of the potential transaction would not result in any job losses in South Africa.


The broader strategic objective would be to achieve a full merger of MTN and Bharti, as soon as it is practicable to create a leading emerging market telecom operator which today would have a combined revenue of over USD 20 billion and a combined customer base of over 200 million, MTN said.

"The discussions, which may have a material effect on the price of MTN's securities if successfully concluded, are at an early stage and may or may not lead to any transaction.

"The structure and terms of the potential transaction may be adjusted to reflect, among others, further discussions between the parties and discussions with lending banks and applicable regulators.

"No decision or agreement to acquire any shares or implement the potential transaction outlined above has yet been made by the Boards of either MTN or Bharti," the South African company said.