MTN chief’s answers raise many questions

South African telecom major MTN group’s half-yearly results announcement on Thursday was a much-watched event, mainly due to the high level of interest in its proposed deal with India’s Bharti Airtel.

Not surprising then that every word uttered by CEO Phuthuma Nhleko, during a presentation after the financial result, was micro-analysed. The two companies are in exclusive talks for a proposed cross-border merger deal worth over $23 billion till September 30.

According to the presentation made by Nhleko, MTN’s vision “is to be the leader in telecommunications in emerging markets”.

But then, so is Bharti’s.

So the big question: Who’ll blink first on management control? How will that be split, if there is a compromise? Will both be run as independently-managed entities?
On the proposed transaction with Bharti, Nhleko said, that it would be “transformational”, but still in line with MTN’s vision.

He has listed the various reasons for the proposed transaction: diversification, scale and synergy benefits, maintaining growth profile, south-south cooperation, and value for
shareholders are some of the rationale.

While dual listing of foreign firms is one of the issues being debated in India currently, Nhleko said MTN will continue to be listed on the Johannesburg Stock Exchange.
Another significant point underlined in the presentation is that Bharti would consolidate its ownership in MTN, while MTN would equity account its ownership in Bharti.

The proposed structure is that MTN and its shareholders would acquire 36% economic interst in Bharti, and Bharti would acquire 49% shareholding in MTN.

According to a report by the Wall Street Journal, Bharti is likely to pay $13.1 billion for the 49% stake in MTN.

Nhelko said he’s looking for “progress in the current proposed transaction” and that the group is “actively seeking value-accretive opportunities in emerging markets.”