MTN Ends Talks With Bharti On U.S. $24 Billion Deal


Talks to create the world's third- biggest cellphone group through a $24bn tie-up between MTN and India's Bharti Airtel collapsed last week. The South African Government is again meddling in the telecommunications sector and has caused the downfall of a deal that could have strengthened the company finances. It leaves MTN with the prospect of financing future expansion out of the rather limited local capital markets.

During the talks, there had been speculation that the merger would bring up to R60bn into South Africa, which would have strengthened the country's current account and the rand. Bharti and MTN revived merger talks in May, a year after previous talks broke down over who would control a merged entity that would have become an emerging- markets giant with more than 200-million customers in India, Africa and the Middle East.

The groups were working on a deal amounting to about $24bn in cash and stock, in which Bharti would get 49% of MTN and MTN and its shareholders would take a 36% stake in Bharti, with a full merger the long-term goal.

Trade in MTN shares was suspended on the JSE at R122.15 at the request of its management last week just before the announcement that the talks had collapsed. Trading was expected to resume today. The merger talks had been extended twice, and the last deadline expired last week.

Finance Minister Pravin Gordhan said MTN had advised him that both companies "mutually decided" to terminate discussions, as they "were not able to conclude all outstanding matters to enable the transaction to proceed". Gordhan said the South African government was supportive of local companies growing and diversifying offshore, and the structuring of such deals was best left to the companies.

"When companies structure their relationships outside the current exchange-control regulatory framework they require the approval of the minister of finance ... this was the case of the proposed MTN Bharti merger." He said the finance ministries of SA and India were committed to laying the basis for the "development of mutually beneficial mechanisms for such mergers".

Last week, Communications Minister Siphiwe Nyanda said MTN should remain a domestic company. "It would be sad if we saw this entity move into the hands and management of foreign nationals," he said. The Government had approached the Indian authorities to consider a dual-listed entity, a structure Indian laws did not now allow.

Business Day