SingTel – BT

SingTel may get a line to Africa, via Bharti

Telco’s Indian associate values MTN at US$39b, eyes a takeover

Singapore Telecommunications associate Bharti Airtel is eyeing South Africa’s MTN Group – a deal which, if successful, would make it the biggest takeover involving an Indian company.

There is speculation that the takeover which has valued MTN at a reported US$39 billion might see SingTel get involved either as a co-buyer or increasing its stake in Bharti. It is already its biggest shareholder with a 30.5 per cent stake.

Bharti may have to raise debt or sell shares to fund a takeover of MTN, according to reports.

Bharti said in a statement yesterday that it had ‘entered into an exploratory discussion with MTN Group Ltd, South Africa’. It added that discussions are still at an early stage and may or may not lead to any transaction.

Getting into Africa via Bharti would tie in with SingTel’s acquisition strategy; it has been increasingly looking at markets outside Asia. In February, SingTel chief executive Chua Sock Koong said it ‘decided not to proceed in Ghana’, where it had reportedly been keen on a majority stake in Ghana Telecom.

Apart from in South Africa, MTN has a presence in Ghana as well as almost 20 other countries in Africa and the Middle East. It could provide a springboard for investors looking to strike deeper into the African continent.

Meanwhile, Ms Chua, who took over as chief in April 2007, has said that SingTel’s focus remains in the region, where it has significant know-how. It is also learning about new markets in Central Asia, the Middle East and Africa.

She has also said that SingTel is keen on increasing its stakes in its associates under the right terms and conditions.

SingTel spokesman Peter Heng yesterday said ‘no comment’ when asked if the group would get involved with the proposed deal.

The Financial Times said that Bharti has arranged US$12 billion in financing and may seek to buy 51 per cent of MTN, valuing the company at about US$39 billion.

The acquisition would be the biggest by an Indian company, eclipsing Tata Steel Ltd’s US$13 billion takeover of Corus Group Plc last year.

‘SingTel is the largest shareholder in Bharti with a 30.5 per cent stake and consequently has interest in this transaction anyway,’ said Citi analysts Anand Ramachandran and Rhys Summerton in a report yesterday.

‘That said, given the size of any potential acquisition, we see a reasonable probability that SingTel would get directly involved with Bharti as a co-buyer as well,’ they added.

But they also said ‘history indicates markets worry about overpayment and dilution first before looking at synergies and extended growth opportunities’, referring to Tata Steel’s takeover of Corus.

Tata Steel fell 10 per cent in the fourth quarter of 2006 as it had to raise its bid for Corus to fend off a rival takeover offer for the UK-based steelmaker.

According to Citi, MTN’s market cap of US$35 billion is just slightly lower than Bharti’s US$42 billion. MTN had a 68 million wireless subscriber base across Africa and the Middle East in March while Bharti had 62 million subscribers.

MTN posted US$4.2 billion in earnings before interest, tax, depreciation and amortisation (Ebitda) for 2007. Bharti reported Ebitda of US$2.8 billion for its financial year ended March this year.

SingTel closed at $3.86 yesterday, down one cent.

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