S African mobile giant MTN faces 'identity crisis' in Bharti deal

MTN's $23 billion deal to merge with the Indian telecom major Bharati Airtel is being delayed as the company does not want to "lose its identity" and wants its South African base to be the "mother ship" of the new entity that will span two continents.



MTN CEO Phuthuma Nhleko that the deal is a "big and complex transaction" and the company has to ensure that it "continues to grow from its South African base and does not lose its DNA".

"We do not want to repeat what happened some 10 years ago when there was a wholesale movement of capital from South Africa," Nhleko told the Sunday Times.

"We are trying to achieve our strategic objectives while the financial objectives must remain palatable. We must ensure that the South African base is the mother ship from which the company continues to grow."

The proposed deal will see Bharti get a 49 percent stake in MTN with the latter getting 36 percent in the Indian company.

The two will merge to become a massive global player, with 200 million subscribers between them and MTN will gain instant access to India, where Bharti has a market share of around 25 percent.

Nhleko said MTN's size meant that opportunities for growth from greenfields operations in Africa and the Middle East were increasingly limited. This meant growth through mergers and acquisitions, probably outside Africa and the Middle East, where it is has huge interests. "

"For us, the logical conclusion is that it has to be eastwards. About 70 percent of new global subscribers in 2010 will be from China and India," Nhleko said.

Analysts here speculate that the deal was being delayed because Bharti would end up in a preferential position but Nhleko was adamant that it was based on a strategic partnership involving cross shareholding.

"What's ideal is a full integration. But there are all sorts of regulatory, political and national identity issues we have to consider if we were to fully integrate the companies," Nhleko said.

Nhleko said while the focus has been on MTN and Bharti, there is another important player in the deal - Singapore Telecommunications (SingTel), the Singapore exchange's biggest company and a 30 percent shareholder in Bharti.

He said SingTel was "an integral part of the deal", not only because it will lower costs but also because of additional synergies.

"SIngtel has a strong innovative hub in Singapore and there is an understanding that there will be symbiosis, and we will then have a far larger innovative base," Nhleko said.

The two groups broke off negotiations last year but have been talking again, at least officially, since the end of May. They have extended their deadline a few times and now have until the end of September to reach an agreement

Bharti, MTN yet to finalise merger deal

Indian telecom major Bharti Airtel and South African telecom giant MTN are yet to finalise their much-awaited merger deal, a senior official said here Friday.

"There is nothing as of now," a Bharti spokesperson said adding the company would update markets only Monday.

Earlier the companies had said the talks on the deal would be concluded by July 31.

The companies revived talks in May this year.

Earlier this month, the market regulator had permitted Airtel and MTN to go ahead with their proposal to buy each other's shares in a $25 billion deal without the latter having to make an open offer in Indian equities markets.

The talks between the two telecom giants had collapsed earlier after Airtel rejected MTN's proposal that would have made the Indian firm a subsidiary of the South African company.

Following that, the South African group had started negotiations with the Reliance Anil Dhirubhai Ambani Group, which also failed.

MTN drops talks with Reliance Communications

Plans by South African mobile giant MTN to expand into India have been scuppered for a second time after the company announced here Friday evening that its extended talks with Reliance Communications have been ended.
In a short statement via the Johannesburg Securities Exchange (JSE), MTN said it had been mutually decided to allow the exclusivity agreement to lapse.
Before it entered into a 45-day exclusivity discussion with Reliance, which was extended for a fortnight that would have ended this coming Wednesday, MTN had also caused great excitement in the market when it announced talks with Bharti Airtel three months ago.
The latest statement, which is a regulatory requirement of the JSE, was intended to advise MTN shareholders that earlier cautionaries were withdrawn: "Shareholders are referred to the announcements released on 26 May and 9 July 2008 with regard to exclusive negotiations relating to a potential business combination between MTN and Reliance Communications Limited. Owing to certain legal and regulatory issues, the parties are unable to conclude a transaction."
Although there was no clarity on what the regulatory impediments were, the legal battle between the Ambani brothers, Anil of Reliance Communications and Mukesh of Reliance Industries, is believed to have been the final straw that led to MTN's decision.
The dispute between the Ambani brothers could lead to court proceedings that would drag on for a long period, promoting views here that it could have hampered MTN's ambitions in India.