Reliance Communications, MTN open negotiations

REUTERS 26 May 2008, 10:16am IST Print Email Discuss Bookmark/Share Save Comment Text Size: | MUMBAI: Reliance Communications Ltd said on Monday that it has entered into exclusive negotiations with MTN Group, after bigger rival Bharti Airtel said at the weekend it had ended takeover talks with the South African firm. ( Watch ) "Reliance Communications and MTN Group have agreed to enter into exclusive negotiations with respect to a potential combination of their businesses," Reliance Communications said in a statement. The two firms, which are in negotiations, have agreed to an exclusivity period of 45 days, the statement said. "We are ... in exclusive negotiations to achieve a partnership, which would provide investors, customers and the people of both companies a global platform for exponential growth," Chairman Anil Ambani said in the statement. Bharti Airtel on Saturday said it had called off talks after MTN proposed a new structure which it said would have seen the Indian firm becoming a unit of MTN. The two groups had hoped to create the world's sixth-largest mobile operator with more than 130 million subscribers in about two dozen countries. Analysts said the news was likely to weigh on shares of Reliance Communications. "The reason investors didn't like talk of the Bharti-MTN deal was the price, and now Reliance Communications will have to pay a price that is at least equal to, or higher than what was being talked about for Bharti," said Arun Kejriwal at investment advisory KRIS. Media and analysts had speculated that Bharti was eyeing a 51 per cent stake in MTN or engineer their merger in a deal that would value MTN at up to $50 billion.

Bharti Airtel-MTN deal hinges on pricing

Chinese, Russian operators may show interest Thomas K Thomas New Delhi, May 7 Bharti Airtel is interested in taking a controlling stake in South Africas MTN but it will depend on the price. Sources close to the negotiations told Business Line that the talks could fail if the price is too high. However, they did not indicate as to when an offer would be made.
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Apart from pricing Bharti will also have to deal with counter bids from other operators who are also eyeing an entry into the African market. A number of operators including those from China, Russia and Europe are keen to pick up a stake in MTN, given its pan African presence across 21 countries. Though no operator other than Bharti has so far admitted to the interest in the South African company, analysts are expecting counter bids over the next few days.
Active role for singtel

Meanwhile, Bharti has roped in Singapore Telecom to be part of the discussions with MTN. SingTel holds about 30 per cent stake in Bharti Airtel and would have got involved in any case but sources said that the Singapore-based company may play a more active role. Analysts said that MTN would be a good fit for Bharti Airtel given that the two companies are equal-sized entities in market value. MTNs market cap of $35 billion compares with $42 billion for Bharti. MTNs 68 million wireless subscriber base also compares with Bhartis 62 million. Alpine Trust, a consortium of MTN management and a private family, is the single largest shareholder with 23 per cent stake in MTN. South Africa Government Pension Fund holds 13.5 per cent. Merrill Lynch and Deutsche Bank are financial advisors to MTN. While sources said that a number of options are being looked at in order to thrash out an agreement, reports suggests that MTN was quoting a premium. If the deal goes through then Bharti and MTN would become the fifth largest mobile operator in the world with a significant presence in Africa, India and West Asia. It will also give Bharti a footprint in the African telecom market which has been dominated by local operators and European majors, including Vodafone Group and France Telecom. Bharti has been trying to get a foot hold into the African market for some time now. Earlier it was in talks with the Gabonese Government to acquire a stake in the countrys national operator. Bharti had also bid for licences in some of the African countries, which has opened up its market to foreign investments. One of the key issues for Bharti will be to raise funds for the acquisition. Reports suggest that the company is already in talks with a number of institutions including Standard Chartered, Deutsche Bank and J P Morgan. Analysts indicated that Bharti may have to cough up as much $20 billion for a 51 per cent stake.

SingTels backing would reduce the burden to some extent though Bharti may still have to raise debt to fund the acquisition. DBS Vickers said in a report that Bharti will likely fund the takeover partly through debt and equity with around $7 billion being raised through a capital increase. It implies that SingTel can raise its stake in Bharti (currently valued at around $13 billion) substantially, which SingTel management has been very keen for quite some time, the report said. Bharti officials were not available for comment.

Bharti's MTN chase hits hurdle

Prabhakar Sinha, TNN 17 May 2008, 01:57am IST Print Email Discuss Bookmark/Share Save Comment Text Size: NEW DELHI: Bharti-MTN negotiation on the proposed merger has hit a regulatory roadblock. A senior banker close to the deal said first round of talks in London has ended on a cordial note but left a huge task ahead - to find ways to overcome regulatory hurdles, particularly in India. It is learnt that Bharti Airtel chairman Sunil Mittal has agreed to go for merger of both the entities as it would create huge synergies but sought help from MTN management to find solution for meeting FDI norm in India, which stipulates that foreign holding in a telecom company cannot exceed 74%. According to the source, MTN management wants the deal to be completed at around 175 rand per share, which makes its market capitalisation of the company at about $50 billion. The source added that MTN management wants 50% of the deal should be done in cash and the rest through share-swap. Even if Bharti pays $25 billion cash, it will have to issue fresh shares worth $25 billion to MTN shareholders to complete the deal. Around 65% of the holdings in Airtel Bharti (M-cap around $40 billion) is with foreign entities. Issuance of fresh shares of $25 billion to MTN's shareholders will take foreign holding in the joint entity to over 78%, which is not allowed under Indian FDI norms. One way out is to increase cash component. But the source said Bharti is not even comfortable with 50% cash component, as it would require the Indian company to arrange for $25 billion. The company has tied up $12 billion. So it needs to raise $13 billion more. He added that raising entire amount under debt would create huge debt liability, which the company would like to avoid. Raising money through selling equity would also be difficult, as without participation from FIIs, it would not be possible for the company to raise such a large funds from the market. FIIs' subscription in equity would make it difficult to maintain FDI norm in share-swap. As FIIs' holding in Bharti Airtel is around 25%, the source said merger might face regulatory hurdle. The merger would also face problem in clearing the broad-based black economic empowerment (B-BBEE) norms in South Africa, where 20% of merged entity's shareholding should be with black investors. If cash component is increased, proportion of black investors might go down below statutory requirements. Success of the deal now depends on merchant bankers, who will have to ensure that the deal goes through without violating regulatory norms. |

Bharti, MTN in talks for 50:50 cash-share deal

BS Reporters / New Delhi/ Mumbai May 15, 2008, 0:34 IST

South African telco turns down exclusivity pact. The top managements of Bharti Airtel and South African telco MTN Group and the Lebanon-based Mikati family (which holds 9.8 per cent) are looking at a 50-50 cash-and-stock deal option as part of possible merger talks against an earlier 60:40 structure. Banking sources said with the MTN shareholders asking for a higher price than what Bharti had initially offered, the Indian telecom company might now pay 50 per cent of the money in cash and the rest through shares in Bharti Airtel. The sources added that MTN is also believed not to favour signing an "exclusivity" contract with Bharti Airtel under which it would be bound not to talk to any other competing bidder till the negotiations with them have been concluded. Issues relating to who will be the chairman of the merged entity Bharti's Sunil Mittal or MTN group Chairman M C Ramaphosa are also under discussions. From Bharti's side, the top negotiating team includes Sunil Mittal and Joint Managing Director Akhil Gupta. MTN is being represented by CEO Phutomo Nhleko and his Finance Director R D Nisbet. The management controls 13.3 per cent in MTN through a company called Newshelf664. Members of the Mikati family are also involved in the negotiations.