Bharti restarts merger negotiations with MTN

Bharti Airtel has restarted discussions to merge with South Africa’s MTN to create an emerging market Indian-African telecom venture with revenues of about $20bn and subscribers of more than 200 million, according to the Financial Times.
Last year talks fell apart because the two parties couldn’t agree where ultimate control of the group would lie.
“This potential transaction would combine the strengths of two leading emerging market telecom operators to create a … group serving the large populations of Asia, the Middle East and Africa,” a statement from Bharti to the Bombay Stock Exchange said, quoted by the FT.
The statement did not put a total value on the deal, but it said MTN would acquire 25% of Bharti for a payment of $2.9 billion in cash as well as new shares equivalent to 25% of its existing share capital.
In return, Bharti would buy 36% of MTN’s shares with a cash payment of 36 rand per share as well as 0.5 Bharti shares (in the form of global depository receipts that would be listed in Johannesburg) for every MTN share acquired, the FT added.
This would take Bharti’s interest in MTN to 49 per cent. Bharti would be given “substantial participatory and governance rights” that would enable it to consolidate MTN’s accounts.
The FT observes that the new deal appears to be designed to make the transaction look like a merger of equals to satisfy South African political sensitivities about selling off a national champion – as demonstrated by the struggle Vodafone had to gain control of Vodacom, which finally floated on the Johannesburg Stock Market last week after months of wrangling.