€16.4b Bharti, MTN deal down to the wire

Hours before their September 30 deadline, Indian telco Bharti Airtel and South Africa’s MTN remain tight-lipped on whether they would be able to clinch a merger.
 
The two have proposed a €16.4 billion deal that would see Bharti picking up 49% in MTN through cash and shares, and MTN and its shareholders buying 36% of Bharti.
 
Analysts tracking the talks said they could extend the deadline for a third time, amid attempts to work out a solution that would appeal to the governments of both countries. On Tuesday, Bharti gained 1% on the Bombay Stock Exchange while MTN’s shares fell 1% on the FTSE/JSE Africa All Share Index.
 
The companies have twice extended their merger talks since they began in May. An earlier proposal for merger fell through last year over disagreements on who would control the entity and political sensitivities in South Africa.
 
While Bharti is expected to issue a statement on the merger today, Dow Jones reported, the fate of the deal is likely to be determined one way or the other by the South African government.
 
South African President Jacob Zuma is reported to have taken advice from colleagues in the African National Congress and a team just back from India. Indian PM Manmohan Singh raised the matter with Zuma at the G20 in Pittsburgh last week, asking him to treat Bharti fairly.
 
Earlier this week, an Indian government official denied that Bharti had proposed a dual-listed company post merger, which is not allowed under present regulations.
 
South African officials had reportedly approached the Indian government about a dual listing because they are keen to retain the operator’s national character. South Africa’s government is said to indirectly hold 21% in MTN.
 
The proposed merger would create an emerging market behemoth, with more than 200 million mobile customers in India, Africa and the Middle East.
 
But “should the MTN-Bharti fall through, we would not be surprised to see MTN involved in other transactions. M&A, particularly in EM, is back on the agenda. MTN might even be able to pursue a strategy of making acquisitions,” Citigroup analysts said in a note this month.
 
Potential partners that could be appealing to MTN include India’s Reliance Communications, which had called off talks with MTN last year following a family feud in Reliance; and state-owned China Mobile, which is encouraged by the government to expand abroad.
 
MTN could also seek a partnership with Kuwaiti firm Zain. Last month chief executive Phuthuma Nhleko told reporters MTN could consider buying all or parts of Zain’s African operations if the Bharti deal fell through. But he said that was an option only if there were no regulatory problems.

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