NEW DELHI: India’s largest telco Bharti Airtel on Monday said it has in talks to acquire a 49% stake in Africa’s largest telco MTN to create a entity stretching from the Cape of Good Hope across the African continent, West Asia and the Indian Subcontinent with revenues of about $20 billion and over 200 million subscribers. The combined entity will be amongst the top five operators globally.

The South African telco will get a 36% economic interest in Bharti in return for offloading the minority stake. The deal size is estimated to be worth over $23 billion.

Bharti and MTN have agreed to hold exclusive talks with each other till July 31, 2009. As per Bharti’s disclosure to the stock exchange, MTN would hold 25% in the Indian telco after the deal, while the re-mainder would be held directly by MTN shareholders.

“The broader strategic objective would be to achieve a full merger of MTN and Bharti as soon as it’s practicable to create a leading emerging telecom operator which today would have combined revenues of over $20 billion and a combined customer base of over 200 million custom-ers,” Bharti Airtel said in its release to the BSE.

The Indian telco said the deal would be achieved through a scheme of arrangement. As per the talks, MTN would acquire about a 25% post-transaction economic interest in Bharti for an effective consideration of approximately $2.9 billion in cash and newly issued shares of MTN equal to approximately 25% of the currently issued share capital of MTN.

Bharti was in similar discussions with MTN last year too before the talks got scuttled with the entry of Reliance Communications into the fray. The Anil Ambani-owned telco was also unsuccessful in striking the deal.

According to Bharti Airtel’s Chairman and Managing Director Sunil Mittal, the company was delighted at the prospect of developing a partnership with MTN to create an emerging market telecom powerhouse. “Both companies would stand to gain significant benefits from sharing each other’s best practices in addition to savings emanating from enhanced scale. We see real power in the combination and we will work hard to unleash it for all our shareholders. This opportunity also represents a first of its kind in developing an Indian-African initiative that would serve as a shining example of South-South cooperation,” he added.

The potential deal will be structured as follows:

▪ MTN would acquire approximately a 25% post-transaction economic interest in Bharti for an effective consideration of approximately USD 2.9 billion in cash and newly issued shares of MTN equal to approximately 25% of the currently issued share capital of MTN.

▪ Bharti would acquire approximately 36% of the currently issued share capital of MTN from MTN shareholders for a consideration of ZAR 86.00 in cash and 0.5 newly issued Bharti shares in the form of Global Depository Receipts (“GDRs”) for every MTN share acquired which, in combination with MTN shares issued in part settlement of MTN’s acquisition of approximately a 25% post-transaction economic interest in Bharti, would take Bharti’s stake to 49% of the enlarged capital of MTN. Each GDR would be equivalent to one share in Bharti and would be listed on the securities exchange operated by JSE Limited.

▪ Bharti would have substantial participatory and governance rights in MTN enabling it to fully consolidate the accounts of MTN

▪ MTN’s economic interest in Bharti would be equity accounted and would have appropriate representation on the Bharti Board

MTN’s CEO Phuthuma Nhleko said that the ‘rationale for this potential transaction between MTN and Bharti was highly compelling’: “It
addresses our strategic imperative of becoming one of the pre-eminent emerging market telecommunications companies with leading positions in three of the fastest growing wireless markets globally, India, Africa and the Middle East, with no overlapping footprint.

We are excited at the prospect of teaming up with Bharti, India’s number one wireless operator and one of the most strongly capitalised players amongst its emerging market peer group. This would create a highly visible commercial partnership between South Africa and India,” Nhelko added.

“The potential transaction between Bharti and MTN would create a leading telecommunication service provider group aligning Bharti’s market leading Indian business with MTN’s market leading African and Middle Eastern operations. The potential transaction would also represent a significant development in South-South cooperation between India and South Africa,” MTN said in a statement.

MTN would continue to be listed on the securities exchange operated by JSE Limited and would be the primary vehicle for both Bharti and MTN to pursue further expansion across Africa and the Middle East while Bharti would be the primary vehicle for both Bharti and MTN to pursue further expansion in India and Asia.

Singapore Telecommunications, a major existing shareholder of Bharti, will continue to be a strategic partner and significant shareholder after the implementation of the potential transaction.

Bharti also added that the potential transaction, when completed, would be expected to create value for its shareholders synergistic benefits and enable it to further diversify into the fast growing and relatively under-penetrated African and Middle Eastern markets.

“This potential transaction would combine the strengths of two leading emerging market telecom operators to create a leading telecom group serving the large populations of Asia, Middle East and Africa. The potential transaction will represent a significant development in South-South cooperation between India and South Africa. Additionally, along with Bharti’s partner, Singapore Telecommunications, and its Bridge Alliance the combined networks will cover a geography spanning Africa to Australasia,” the company added in a statement.

Both companies also warned that the ‘discussions are at an early stage and may or may not lead to any transaction’. “The structure and terms of the potential transaction may be adjusted to reflect further discussions between the parties and discussions with lending banks and applicable regulators. No decisions or agreement to acquire any shares or implement the transactions outlined above have been made by the Boards of either MTN or Bharti,” they added in a joint statement.

Standard Chartered Bank and its affiliate First Africa SA (Pty) Ltd are the financial advisers and AZB & Partners and Bowman Gilfillan are the legal advisers to Bharti.

source: Economictimes

Tags: airtel buys MTN, bharti airtel MTN deal, bharti aritel, bharti merge mtn, bharti MTN deal, hot news, merger bharti, mtn deal

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