Bharti MTN Deal

In the backdrop of domestic major Bharti Airtel and South Africa's MTN hoping to finalize the merger deal by mid September 2009, let's have a look at what has transpired between the two until now.

Background of the deal

Bharti and MTN were in talks of a merger since mid 2008. However, those talks collapsed as supposedly, MTN wanted a bigger stake in Bharti. Later Anil Ambani's Reliance InfoCom too tried for a merger with MTN but the talks stalled after brother Mukesh Ambani's Reliance shot a mail in June 2008, claiming it had the rights of first refusal in the event of a change of management at RCOM.

The current valuation of the deal

The deal was again revived by Bharti in early 2009 and as of May 2009, the deal was worth USD 23 billion. This is much lower than the USD 45 billion, at which the deal was valued at when the talks had initiated in 2008. Bharti will acquire a 49 per cent stake in MTN, which in turn would buy 36 per cent interest in Bharti. The deal involves about USD 10 billion worth cash transaction and remaining USD 13 billion in shares from the two sides. It may become the largest cross border acquisition by a domestic company after the $12.7 billion Tata-Corus deal.

About MTN

MTN is a telecommuications company bassed in South Africa and active in 21 countries, operating mainly in African and Middle Eastern companies.

What's in it for Bharti

Major benefit for Bharti is expanding its subscriber base. Today, Bharti has over 100 million subscribers in India and has a small overseas presence in areas like Seychelles, Jersey Islands and Sri Lanka. MTN, which has 100 million subscribers across Africa , Middle East and Asia, will catapult Bharti to the top five in the global pecking order.

Current Scenario

Both parties are hoping to finalize the deal by mid-September 2009. Their major point of contention is over the valuation and management rights where MTN is supposedly bargaining for more and Bharti may have to loosen a bit. But, both are hopefully close to resolution and sealing the deal. Also, Bharti has shortlisted 8 banks for a 5 year offshore loan up to $4 billion. Barlcays Bank and StanChart are the coadvisors. Deutsche Bank and Merill Lynch are advising MTN on the deal.