Shares in India’s Bharti Airtel flip-flopped on Wednesday morning, after falling more than 10% in the previous two sessions on fears its plan to buy a part of South Africa’s MTN would initially dilute earnings.
Analysts said the earnings concerns were overdone, but they would continue to weigh on investors in the short term.
”There was no reason for the stock to fall yesterday. The present weakness in shares is actually a great opportunity to buy,” Amitabh Chakraborty, head of research at Religare Securities, said.
Shares in Bharti were up 0,4% at 773,60 rupees at 5.33am GMT, but lagged the 30-share BSE index that was up 2,7%. They fell as much as 2,5% early and was the only loser in the index.
Bharti, India’s top mobile operator, and MTN said on Monday they had revived merger talks to create a $61-billion telecoms giant spanning Africa, Asia and the Middle East a year after their previous attempt foundered over who would control the combined entity.
Bharti, which will issue new shares to partly fund its plan to buy a 49% stake in MTN, said on Monday its earnings-per-share would be diluted in the first year after the deal and pick up after that.
Brokerage Motilal Oswal believes the deal would dilute Bharti’s earnings per share by 4%. But it maintained a ”buy” rating on the stock with a one-year price target of 984 rupees.
Analysts widely agree the deal would prove to be positive for the company over the long term as it would bring in new technology to help roll out lower-cost products and expand its geographical reach.
Banking sources told Reuters Bharti might raise $3-billion to $4-billion in debt if the merger talks succeed.
Bharti said on Tuesday said it had not yet decided how to raise any funds, but it did not anticipate funding requirements for the deal would be onerous. – Reuters