A deal between MTN, of South Africa, and Bharti Airtel, of India, to allow the telecoms groups to exploit markets in Africa and the Middle East may be about to founder.
With only two weeks to go before talks are due to expire on September 30, the Financial Times has learned that Pretoria told MTN last year that the state would never allow the country's "strategic corporations" to be domiciled offshore during negotiations involving a merger with Reliance Communications, another Indian mobile operator.
This suggests a link-up between MTN and Bharti is unlikely for the time being, say bankers. The MTN-Reliance talks were abandoned after Pretoria's move.
"I don't think, besides being a mere aspiration, that a merger [between MTN and Bharti] is frankly on the cards for some time," said one banker familiar with the Bharti-MTN negotiations. The companies have been locked in talks since May over a plan in which Bharti would take a 49 per cent stake in MTN with a view to undertaking a full merger in a cash-and-shares deal worth about $23bn. The promise of a full merger is part of the key rationale for doing the deal from Bharti's perspective. It would give Bharti management control over the South African company as well as access to MTN's cash flows and enable it to realise greater synergies.
But in July 2008, when MTN was locked in negotiations with Reliance, Trevor Manuel, then South Africa's finance minister, told Cyril Ramaphosa, MTN chairman, that the country's "strategic corporations" should be retained onshore.
Mr Manuel said these companies should remain incorporated in South Africa and retain their primary listing there, people familiar with those talks said. Mr Manuel raised the alternative of a dual listing but this option was dismissed during the Reliance and MTN talks because of the difficulty of implementing such a structure under Indian regulations.
Pretoria reiterated its position at the weekend when Siphiwe Nyanda, communications minister, told South Africa's Sunday Times that MTN was a "South African company with a footprint in Africa ... and we are interested that it should remain [here]".
Without a full merger, Bharti faces the prospect of remaining a minority investor with a 49 per cent stake in a South African company that will be controlled by its block of South African shareholders and will have independent operations and management. Currently, Bharti is unable to independently enter Africa or the Middle East, ruling it out of two of the fastest growing markets. Bharti declined to comment.
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Source: Factiva - Article 2019
http://factiva.com/index_f_w.asp
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