Saturday, May 24, 2008

"Stalemate: Bharti accuses MTN of deviating from agreed terms"

India's largest private telecom company Bharti Airtel on Saturday pulled out of negotiation for acquiring an estimated 45-50 billion dollar MTN, saying the South African telecom entity deviated from agreed terms.

"An in-principle agreement was reached on 16th May and a term sheet was initialled between two lead bankers... MTN has now presented a completely different structure, from what was agreed," Bharti said in a statement.

The new structure envisaged Bharti Airtel becoming a subsidiary of MTN and exchange of majority shares of Indian company held by Sunil Mittal, promoter of Bharti, family and its foreign partner Singtel, in exchange for a controlling stake in MTN.

"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," the company said.

Both (Bharti and MTN) had initiated talks about three weeks ago and talks were cordial through out this period and conducted in good faith.

Bharti also claimed that over a dozen internationally reputed bankers from the US and Europe of having pledged funds of over 60 billion dollars for the acquisition.

The reference point at which MTN shares were to be transacted was agreed and frozen at the point of starting the discussion and Bharti would like to confirm that there was no further discussion on the share price of MTN, at any point.

"Speculation rife that Bharti, MTN talks deadlocked"

EVEN as Bharti Airtel maintained that talks with South Africa’s MTN were still continuing, speculation was rife in Delhi that talks between both companies had reached a stalemate. While ET has not been able to verify the authencity, unconfirmed rumours doing the rounds in Delhi late on Friday night, said that both companies were expected to make an announcement shortly that talks were being postponed to a later date.

Both companies would use the interim period to address the regulatory and legal hurdles that confronts the deal, industry sources here said. Industry sources in Delhi also quoted bankers in London who are close to the developments as admitting that whether it be a buyout or merger, Bharti would first have to workout the corproate structure of the combined entity in such a way that it confirms to the existing regulations in both countries. They also quoted bankers as saying that both companies had not called off talks, but had decided to put them backburner in order to give Bharti time to work address all hurdles.

However, when contacted, the Bharti spokesperson rubbished these rumours and said that talks between both companies ‘were still on’, while adding that the company (Bharti) had nothing further to state. It must be pointed out that ET has not been able to establish if these rumours are true. Besides, ET also categorically states that industry sources here who tipped the paper of this development are not associated with Bharti Airtel. It must also be clarified that ET has not been able to reach any of Bharti’s top management to verify if these rumours are true.

"MTN to buy back share, AGM on Jun 19"

MTN, which is in merger talks Bharti Airtel, has decided to buy back 10% of its share capital. The South African telco will move a special resolution at its annual general meeting on June 19.

The Johannesburg-based company will also seek shareholders’ permission to authorise its board to sell 10% of its unissued share capital at a price to be determined by its board. It had passed an ordinary resolution to this effect at the last AGM. In the absence of any move in this direction, the authority given to the board is slated to lapse at the next AGM. The company now proposes to extend it for another year.

While the rationale for the proposed capital decisions is unclear, companies abroad often buy back shares to hold these as treasury stock instead of cancelling the shares as Indian companies are required to do. After the scrip gets repriced in the market following the buyback, these shares are sold at a higher price.

Industry sources said the proposed restructuring of share capital is linked to the company’s plans to merge with Bharti Airtel.