MTN says deal with Bharti to create giant from India to Africa
Tuesday, 26 May 2009, 22:04 IST   |    2 Comments
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Johannesburg: South African telecom giant MTN believes a potential transaction with its New Delhi-based counterpart Bharti Airtel would create a giant that would straddle India, the Gulf and Africa. In a statement to shareholders here, MTN said the potential transaction would create a leading telecom service provider aligning Bharti's Indian business with MTN's African and Middle Eastern operations. MTN, which has reopened discussions with Bharti Airtel after talks failed last year, said this would also foster south-south cooperation. It said the implementation of the potential transaction would not result in any job losses in South Africa. MTN advised shareholders no decision had yet been made to enter into or implement any particular transaction. It said the two groups were currently exploring a potential transaction, whereby MTN and its shareholders would acquire about 36 percent in Bharti, while Bharti would acquire approximate 49 percent shareholding in the South African entity. MTN shares jumped 9 percent on the Johannesburg Securities Exchange Monday, goading analysts to express optimism over the proposed deal. Jan Meintjes, portfolio manager at Gryphon Asset Management, said discussions had deadlocked last year because neither group was happy about the other having a controlling interest. "The world looks different today to a year ago. Perhaps the economic downswing has shrunken the egos," Meintjies told the Afrikaans daily Beeld here. Dobek Pater, analyst at Africa Analysis, felt that MTN could learn a lot from Bharti, which was competing with other operators in a low-tariff market. Bharti chairman Sunil Mittal had earlier said the transaction presented advantages for both groups, including cost savings through economies of scale. Bharti and MTN have agreed to discuss the potential transaction exclusively with one another till July 31. MTN said the broader strategic objective would be to achieve a full merger of MTN and Bharti, as soon as it was practical, to create a leading emerging market telecom operator with a combined revenues of over $20 billion and a combined customer base of over 200 million. Bharti would have substantial participatory and governance rights in MTN, enabling it to fully consolidate the South African firm's accounts. MTN's economic interest in Bharti would be equity accounted and it would also have representation on the Indian operator's board. The potential transaction, when completed, would be expected to create value for MTN shareholders due to, among others, synergistic benefits and a further diversification of MTN's income streams into the fast growing and relatively under-penetrated Indian market. The potential transaction is also expected to create value for Bharti shareholders, due to, among others, diversification of the company's income streams into the fast growing and relatively under-penetrated African and Middle Eastern markets. MTN would continue to be listed on the Johannesburg Securities Exchange and would be the primary vehicle for expansion across Africa and the Middle East, while Bharti would pursue expansion in India and Asia.
Source: IANS
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