MTN, Bharti merger talks could wind up soon

Merger talks between India’s biggest cellphone services firm, Bharti Airtel, and South Africa’s flagship MTN Group could wind up this weekend, a report said on Saturday.

Bharti and MTN, Africa’s biggest cellular operator, were putting finishing touches to a funding structure for the proposed merger, India’s Mint newspaper reported, quoting unnamed people who it said were close to the discussions.

A Bharti official declined to comment on the report.

A merged group would create the world’s sixth-largest mobile company with a network of 130-million subscribers — 68-million from MTN and 62-million from Bharti — that would dominate two of the world’s fastest-growing cellular markets, India and Africa.

Johannesburg-based MTN may have to be valued at up to $50-billion, or $25 a share, including debt — about 25% more than its current stock-exchange value — for a deal to be struck, analysts say.

MTN, whose shares have soared since the merger talks were confirmed by the two companies on May 5, has net debt of about $2,9-billion.

Bharti’s shares have dropped by 7% since the discussions were announced amid concern the transaction could strain its balance sheet.

Indian newspapers have been reporting for days that Bharti’s negotiations with MTN were at a crucial phase.

Bharti might offer the chairperson’s post of the proposed merged colossus to MTN group chairperson Cyril Ramaphosa to sweeten its overtures, India’s Business Standard newspaper said on Friday.

Bharti’s billionaire chairperson Sunil Mittal would be deputy chairperson and group CEO, while MTN CEO Phuthuma Nhleko would be deputy group CEO, the paper reported.

Bharti has said ”discussions being held are aimed at combining the strengths of two players from emerging markets” and that it was looking at ”possible structures to achieve this objective”.

Bharti wants to acquire a 51% stake. But MTN, which serves 21 markets across Africa and the Middle East, is pushing Bharti to buy out 100% of the company in a transaction that could be portrayed in South Africa as a merger of equals, reports said.

If it goes ahead, the deal would easily eclipse Tata Steel’s $13,7-billion takeover of Anglo-Dutch steelmaker Corus last year, India’s biggest foreign acquisition so far.

However, a deal could hit Indian regulatory hurdles as foreign ownership in the new merged group might exceed the allowed 74%, reports said.

MTN wants half the merger to be carried out through a share swap, the Times of India reported.

But any new share issue by Bharti to complete the transaction could hike the foreign stake in the Indian company to as much as 78%.

Foreign investors, including Singapore’s SingTelNet, already hold 65% of Bharti. — Sapa-AFP

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