Reliance may pay premium for MTN control

India’s Reliance Communications is prepared to pay a significant premium for control of South African mobile phone group MTN, the FT Alphaville website said on Thursday.

The website said there were two options for the transaction: a straightforward cash and shares bid for MTN from Reliance, or a second plan under which MTN would retain its South African identity but Reliance chairperson Anil Ambani would own 34,9% of MTN.

MTN and Reliance said on Monday they were in exclusive talks after India’s biggest mobile phone operator Bharti Airtel broke off talks with sub-Saharan Africa’s biggest cellphone group.

A combination of MTN, valued at $35-billion at Wednesday’s close, and Reliance, valued at $27-billion, would create a top ten global industry player to rival Japan’s NTT DoCoMo in market value. In terms of subscribers, a merged group would slot in just below Deutsche Telekom as the seventh biggest in the world.

FT Alphaville said, without citing its sources, that under the full control option, MTN chief executive officer Phuthuma Nhleko would become CEO of the enlarged group for at least three years.

MTN chairperson Cyril Ramaphosa will become co-chairperson alongside Ambani for 12 months. After this period, Ambani will then become chairperson and Ramaphosa vice-chairperson.

Under the second option, MTN will buy 51% of Reliance from Ambani and pay in stock.
The exchange ratio will include a premium deal price and MTN would then make a cash offer for 20% of Reliance shares held publicly.

MTN shares were 4,7% stronger at R149,13 in Johannesburg by 14.39am GMT while Reliance Communications shares closed 3,9% higher at 573,20 rupees in India.

Ambani would then have enough shares in MTN from existing shareholders to lift his direct stake to 34,9%.

The website said although Ambani will have economic ownership of little more than 33% of the enlarged company, he is insisting on effective control in return for a premium valuation of MTN.

It said Nhleko has been informed that he would be asked to head a combined MTN Reliance for at least five years.

Existing stock market listings in New Delhi, Mumbai and Johannesburg would be retained and a secondary listing in London is planned. - Reuters

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