SingTel – BT

Bharti-MTN merger talks collapse again

Indian telco blames SouthAfrica for latest breakdown; MTN shares slide

Talks between Bharti Airtel and MTN Group to create the world’s third-largest mobile operator collapsed for the second time in just over a year yesterday.

Singapore telco SingTel has a stake of about 30.4 per cent in Bharti, India’s largest mobile operator. Bharti blamed the South African government for the latest breakdown in a deal that faced close scrutiny from regulators and politicians.

South Africa was eager to retain MTN’s national character and had approached the Indian authorities to consider a dual-listed entity, a structure Indian law does not allow.

‘We hope the South African government will review its position in the future and allow both companies an opportunity to re-engage,’ Bharti said, adding that it would continue to explore international expansion opportunities.

Shares in MTN, Africa’s biggest mobile operator by subscribers with a market value of about US$31 billion, fell as much as 3.5 per cent to 119 rand after the news.

Ahead of the news, shares in Bharti closed 0.1 per cent lower in a market that rose 1.6 per cent.

Bharti and MTN revived talks in May, a year after previous negotiations broke down over who would control the resulting emerging-markets giant with more than 200 million customers across India, Africa and the Middle East.

Under the initial terms outlined in May, MTN and its shareholders would take a 36 per cent economic interest in Bharti, which would end up with 49 per cent of MTN.

The deal would have given both exposure to new markets ripe for growth, while a full merger, the eventual aim of the talks, would yield cost savings, allow for technology sharing, and provide financial muscle for more expansion, analysts say.

A combined entity would have been the third-biggest mobile operator based on subscribers, behind China Mobile and Vodafone.

The exclusive talks over the deal were initially due to end on July 31 but were extended twice earlier.

Bharti had increased the cash component of its offer for a 49 per cent stake in MTN to US$10 billion from a proposed US$7.6 billion, two people familiar with the matter had said.

On top of that, the Indian firm was paying US$4 billion in stock for a total package of US$14 billion, 7 per cent more than an estimated US$13 billion proposed initially.

India’s capital markets regulator last week altered the country’s takeover rules, requiring a company that acquired 15 per cent of an Indian firm through American depositary receipts or Global Depositary Receipts (GDRs) with voting rights to make a mandatory offer for a further 20 per cent.

Under the new rules, MTN might be required to make an offer for an additional 20 per cent stake in Bharti, if it is issued GDRs with voting rights.

Standard Chartered and Barclays were advising Bharti Airtel, while Bank of America Merrill Lynch and Deutsche Bank were advising MTN. — Reuters

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