"INDIAN PRIDE COMES FIRST"

Bharti ends MTN call

South African telecom major accused of trying to push a structure wherein the Indian company would have become an arm of MTN

Our Bureau NEW DELHI

IT TURNED out to be a dropped call in the end. After almost four months of discussions, Bharti Airtel called off merger talks with South Africa’s MTN on Friday night, accusing it of deviating from agreed terms and of trying to push a structure which would have resulted in the Indian company becoming a subsidiary of MTN. The South African company also wanted majority shares of Bharti Airtel held by the Bharti family and Singtel in exchange for a controlling stake in MTN. This too was unacceptable to the Indian company.

“Bharti believes that this convoluted way of getting an indirect control of the combined entity would have compromised the minority shareholders of Bharti Airtel and also would not capture the synergies of a combined entity,’’ said a company statement. In an attempt to link the discussions with MTN to national pride, the statement adds: “Further and more importantly, Bharti’s vision of transforming itself from a home-grown Indian company to a true Indian multinational telecom giant, symbolising the pride of India, would have been severely compromised and this was completely unacceptable to Bharti.”

MTN, on its part, has promised to disclose it side of the story on Monday. “We will update our shareholders as the market opens on Monday morning,” MTN spokeswoman Nozipho January-Bardill told an international news agency.

The collapse of the merger talks means that the largest takeover attempt by an Indian company has ended in failure. ET had on May 24 reported that discussions between the two had reached a stalemate and that an announcement regarding the postponement of talks was expected shortly.

While Bharti has stated that “it wishes MTN all the best,” its unhappiness with the South African telco is evident. A successful merger would have led to the formation of the world’s sixth largest telecom company with a presence in 23 countries covering the African continent, Central and Western Asia and the Indian sub continent. At current valuations, the Bharti-MTN would have a m- cap of over $80 billion and a subscriber base of 130 million. And while Bharti has asserted that it remains keen to expand in the global arena, it is yet to be seen whether it can succesfully target a company of MTN’s scale and with which there is an equivalent synergystic fit. The breakdown of talks will also constitute a personal setback for Bharti Airtel chairman Sunil Mittal who was spearheading the negotiations and till a few days ago was pretty confident about the deal going through.

Discussions between Bharti and MTN are said to have begun in February and at that time a reference price of around 160 Rand per share (the then market price of MTN was less than 130 Rand) was agreed upon.

Subsequently, a number of structures were discussed and evaluated between the lead bankers on both sides. An in-principle agreement was reached on May 16 and a term sheet was initialled between the two lead bankers.