Sucheta Dalal :Bharti-MTN to extend exclusive talk period till 31st August
Sucheta Dalal

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Bharti-MTN to extend exclusive talk period till 31st August  

August 3, 2009

 

India's largest telecom major Bharti Airtel Ltd and South Africa-based Mobile Telephone Networks (MTN) have agreed to extend their period for exclusive talks till 31st August as no decision has been taken by their respective boards to acquire shares or implement the proposed merger.
 
"As discussions between the parties regarding potential transactions are on, both parties have now agreed to extend the exclusivity period up to 31st August 2009," Bharti Airtel said in a filing to the Bombay Stock Exchange.
 
In a separate statement, both Bharti and MTN said, "No decisions or agreement to acquire any share or implement the transaction has been made by the Boards of either Bharti or MTN and the discussion may or may not lead to any transaction."
 
This is the second time in a little over a year that Bharti has entered into negotiations with MTN for a proposed share-swap and cash deal, to merge the two companies to create a $23-billion telecom conglomerate.
 
Bharti Airtel is exploring a potential transaction whereby it would acquire 49% shareholdings in MTN and in turn, MTN and its shareholders would acquire approximate 36% economic interest in the company.
 
In May 2008, Bharti had failed to reach a deal with MTN when a South African carrier offered Bharti to become its subsidiary. MTN chief executive Phutuma Nhleko immediately switched over to Reliance Communications Ltd (RCom) for negotiations, in a bid to make a dent into the Indian market—the world's second-largest wireless market.
 
But with Reliance Industries Ltd (RIL) jumping into the fray in mid-June 2008, with claims that it had the right of first refusal on a majority stake in RCom, the talk between RCom and MTN remained futile.
 
Subsequently, Rcom and MTN turned their backs on each other, leaving the M&A talks halfway citing certain legal and regulatory issues. Ironically, the real reason was due to the ongoing spat between the two Ambani brothers.
 
It is understood that Bharti is still keen to spread its wings overseas. Its interest in MTN is shored up by Singapore Telecommunications Ltd (SingTel), which is already benefiting from its investments in high-growth international markets, including a 30.5% stake in Bharti. SingTel will continue to be a strategic partner and a significant shareholder as soon as the implementation of the potential transaction takes place, Bharti said.
 
Additionally, along with Bharti's partner SingTel and its Bridge Alliance; the combined network is expected to cover Africa, Australia and Asia. Bharti will be a primary vehicle for both Bharti and MTN to take up future expansions in India and Asia, while MTN would continue to remain as a primary vehicle for both Bharti and MTN to carry out expansions in Africa and the Middle East, the company said.
 
Indian market regulator SEBI said MTN need not make an open offer to Bharti Airtel shareholders in India as its shareholding in the Sunil Mittal promoted company would be through the Global Depository Receipts (GDR). The open offer will only trigger once the GDRs, issued to MTN and its shareholders by Bharti Airtel are converted into local shares with voting rights, SEBI said.
 
However, 21 African, Middle East and Asian countries where MTN operates are all regulatory minefields and could pose both a potential speed breaker and a challenge for Bharti. The proposed transaction will require regulatory approvals in India, South Africa and countries in which MTN operates.
 
Meanwhile, it is still not certain whether the recently restructured Competition Commission of India will need to review and bless this deal. - Yogesh Sapkale [email protected]

-- Sucheta Dalal



 



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