"potential bidder for MTN"

RCOM emerges

potential bidder

RELIANCE Communications is also believed to be in talks with MTN for a possible deal, reports Our Mumbai Bureau. Media reports on Saturday said RCOM has been in discussion with MTN officials since Thursday night. RCOM, however, declined to comment. This is the second time that RCOM's name has surfaced as a possible bidder for MTN. Early this month too, the CDMA major was said to be interested in the South African co. CALL DROP Blame it on FDI cap

THIS agreed term sheet was presented to the MTN board on May 21. It is learnt that the MTN board expressed its displeasure with some aspects of the Bharti proposal. According to sources, MTN’s independent directors were believed to be concerned about how the structure proposed by Bharti will get around India’s FDI restriction of 74% foreign ownership. The directors expressed doubts over Bharti’s proposed solution and were unwilling to commit themselves. Secondly, the directors were not happy with the amount of debt that is being loaded on to the books of the combined entity. About $20 bn of debt would have been taken on by the combined entity, as per Bharti’s proposal. The directors felt that such a large leverage would put a leash on the entity’s plans and prevent it from pushing ahead with its expansions. But this could not be confirmed.

Sources say India’s 74% FDI sectoral cap turned out to be significant obstacle in the negotiations. It is learnt that Bharti executives had sounded off government officials about the possibility of waiving off the 74% cap for this transaction but did not get a favourable response.

While questions have been raised about Bharti’s ability to raise the funds required to fund the acquisition or the cash-cum-stock merger, the company has said it arranged letters of credit to the tune of $60 billion from banks in the US and Europe. At the same time, Bharti also clarified that it would not engage in a bidding war for MTN. Bharti would have required anywhere between $40 billion to $50 billion for a 100% acquisition.

The Bharti stock has fallen by over 12% from over Rs 900/share from late last month when news about a it being in discussions with MTN first became public. On Friday, Bharti shares closed at at Rs 836.80.