Indian telecom giant Bharti announced that it has opened talks for acquiring 49 per cent stake with South African MTN in an estimated 23 billion dollar deal.
An acquisition valued in excess of $23 billion may seem unlikely during an economic slowdown. But India’s leading telecom operator, Bharti Airtel, is proposing a cross-holding deal with South Africa’s MTN which is potentially worth that much. If the deal goes through, Bharti would acquire 49% in MTN. MTN and its shareholders would get around 36% in Bharti, of which 25% would be held by MTN and the remainder by its shareholders.
The combined market value of Bharti and MTN at this moment would be over $62 billion. Of this, Bharti contributes $34 billion and MTN $28 billion. But MTN is the bigger company by far, with annual revenues of $12 billion against Bharti’s $7.5 billion.
If consummated, it will be India’s largest overseas transaction, bigger than the $13 billion Tata-Corus deal of 2008.
The broader strategic aim of the deal “would be to achieve a full merger of MTN and Bharti as soon as it is practicable to create a leading emerging market telecom operator which today would have combined revenues of $20 billion and a combined customer base of over 200 million”. In terms of subscribers, it would be No 4 in the world, after China Mobile, Vodafone, and Telefonica SA.
For Bharti, this is the second time it is trying to hitch up with MTN. A year ago, it had announced that its talks with MTN had failed. After that, Reliance Communications made an abortive bid for MTN.
On Monday, Bharti Group chairman Sunil Mittal said the company was “delighted at the prospect of developing a partnership with MTN to create an emerging market telecom powerhouse”. Bharti and MTN will talk exclusively with each other till July 31 to work out a deal. The two companies maintain that discussions are at an early stage and a deal may or may not be signed.
Earlier this month, Bharti had crossed the mark of 100 million subscribers and Mittal had said he was targeting a user base of 200 million over the next two years. If the talks with MTN fructify, Bharti would reach its target immediately as the South African company has around 100 million subscribers.
MTN chief executive Phuthuma Nhleko said in a statement: “The rationale for this potential transaction between MTN and Bharti is highly compelling.” According to him, the deal would address the company’s strategic imperative of becoming one of the pre-eminent emerging market telecom companies with leading positions in three of the fastest growing wireless markets globally, India, Africa, and West Asia, with no overlapping footprint.
Top 5 global wireless firms by subscribers (millions)
China Mobile 477
Vodafone 303
Telefonica SA 198
Bharti+MTN 195
America Movil 187
As on March 31, 2009
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