"Why MTN buy will be good for Bharti"

Acquiring the Johannesburg-listed MTN even with a partner like Singtel will not be easy for Bharti Airtel , India's biggest telco. So, buying MTN on it's own will be an even bigger challenge.

That's because the costs involved are huge: the estimated enterprise value of MTN is about $40 billion, so a 51 per cent stake would cost about $22-25 billion, assuming some acquisition premium will be paid.

That's a large sum of money even if Bharti is in a position to generate about $3 billion of free cash every year between FY10-12. Also, even if it controls about a fourth of the Indian wireless market, the company must surely be looking for a bigger share which means continuing investments in spectrum and equipment. Bharti cannot afford to fall short of money to fund the capex in India.

However, at a price, the deal makes good business sense because it will give Bharti access to markets in over 20 countries where the penetration remains low - at around 43 per cent - and opportunities for growth are high.

De-risking a business model by expanding in new geographies is always a good idea and Bharti should be able to be able to turn MTN into a low-cost operation like its own. Analysts say MTN's cost per minute is far higher than Bharti's.

Moreover, given that the combined entity will have a subscriber base of 125-130 million, growing fast, Bharti will have better bargaining power with equipment suppliers and handset vendors.

Since both MTN and Bharti are highly profitable companies with operating margins of 40 per cent plus and a combined ebitda of around $7 billion, and since the outlook for the business remains promising, an increase in Bharti's debt from current levels of just over $1 billion is not that worrying.

So Bharti should pursue the deal because there is an opportunity even if investors are concerned: the stock lost over 5 per cent on Tuesday to close at Rs 847 with the street worried about the higher levels of debt or an overhang for the stock if the deal is funded partially through stock.

"Microsoft's $40 billion question"

BY Wendy Tanaka, Forbes......




Here's a question for Microsoft chief executive Steve Ballmer: Is Yahoo! really worth all this hassle?

After more than two months of waiting to negotiate with Jerry Yang and company, you finally got frustrated over the weekend and sent a strident letter to Yahoo!'s board members, giving them three more weeks to come to the table before you start replacing them.


You backed up your emotions with data and facts: Since Microsoft launched its $44.6 billion unsolicited bid for Yahoo! Jan. 31, the Internet portal has been trying to wrangle deals with News Corp, Google and Time Warner to stay independent, but no such deal has surfaced yet.

Your stock is down. Yahoo!'s stock, buoyed by your offer, is up. And that means your offer--which at the time was a 62 per cent premium over Yahoo!'s share price--has eroded a bit. "The public equity markets and overall economic conditions have weakened considerably," you wrote.

Up for debate is whether Yahoo! has gained or lost customers for its search engine and other offers over the past two months. You say Yahoo! is losing customers. Yahoo! chief executive Jerry Yang and chairman Roy Bostock contend Yahoo! is pulling its act together.


But the bottom line is that Yahoo! is no more amenable to a deal than it was two months ago. Maybe even less so. "Yahoo!'s business forecasts are consistent with what we outlined in our last earnings call," retorted Yang and Bostock in a return letter. "We have had constructive conversations together regarding a variety of topics, including integration and regulatory issues," they wrote. But Yahoo! is worth more than $40 billion and change, the executives maintain.

If $40 billion or so isn't enough for Yahoo!, what else could Ballmer spend the money on to bolster Microsoft's business? Fact is, $40 billion is a lot of money, no matter the currency.

Here are a few suggestions for what else Microsoft could get for $40 billion:

Hire 40,000 engineers, at $100,000 apiece, for a decade

Acquire Facebook (estimated to have a market value of $15 billion), along with just about any other meaningful social networking site, including MySpace, Bebo, Hi5 and LinkedIn. There would still be enough money left over to pay some consultants to help with integration.

Spend eight times more than Google did last year to acquire traffic--and presumably make traffic more pricey for Google, to boot.

Hire 80 million workers in China to do nothing but click on Microsoft properties and related ads for 10 years.

Promise a free Big Mac to everyone who clicks on a Microsoft ad--and give away 14 trillion of 'em.

"Microsoft likely to turn hostile in Yahoo bid"

Microsoft is likely to pursue a hostile bid for Yahoo Inc takeover, people familiar with the proceedings said.

However, the situation remains fluid as discussions continue. The software giant is likely to change tracks before announcing its decision on Friday. Microsoft said nothing about its plans.

In an interview to Wall Street Journal, Steve Ballmer, Microsoft CEO, declined to comment on his company's decision or the probable day when this decision would be made public. He said Microsoft will announce its decision when the circumstances are right.

Price will be a key factor if Microsoft turns hostile towards Yahoo. Microsoft's unsolicited cash-and-stock offer was valued at $29.48 a share as of 4 p.m. on Thursday, on Nasdaq stock market composite trading. Yahoo had rejected this offer on the grounds of undervaluation.

The software major had decided to up its bid as much as $33 per Yahoo share as major Yahoo shareholders have signalled that they want a price in the range of $35 to $37 a share, informed sources said.

In case it decides to turn hostile, Microsoft will put forth an offer which it deems will be acceptable to Yahoo shareholders, though investors might ratchet down their demands in the face of a take-it-or-leave-it Microsoft offer.

As reported in WSJ, while addressing his staff at its Redmond headquarters in Washington on Thursday, Ballmer confirmed that he was not willing to pay a dime above what he thought Yahoo was worth. He added that Microsoft will announce its decision in a relatively short order. His comments were provided by a company spokesperson.

A Yahoo spokesman declined to comment on Ballmer's remarks.

A hostile bid would raise the risk of many Yahoo employees leaving in the process. Yahoo's poison-pill anti-takeover defenses essentially require any would-be hostile acquirer to remove its board. A vote on the directors occurs annually at Yahoo's shareholder meeting. Although the annual meet is not yet announced, it likely to be held in July.

In his interview to WSJ, Ballmer said that he is confident Microsoft will be able to build a competitive online-advertising business without buying Yahoo, though such a move may be more time consuming. He voiced optimism in Microsoft's options if it decides not to pursue its Yahoo bid.

Whilst outlining his company's rationale behind buying Yahoo, Ballmer said he believed Yahoo has the technology but not the scale, like number of customers and advertisers that it needs.

Shrugging off the perception that Microsoft has failed in its attempts to build its own online services and ad business, Ballmer said he appreciates his company's strategy but doesn't like its position. He would prefer a better position compared to the company selling maximum ads, referring to Google Inc, WSJ reported.

Responding to a question on alternative acquisitions to Yahoo, Ballmer said there are very few Internet companies that have the kind of size Microsoft needs to expand its business rapidly.

As reported in WSJ, while talking about the scale of an Internet company, Ballmer listed five to six companies that have a reputation to vouch for -- News Corp's Myspace, Facebook Inc, Yahoo, Google, Time Warner Inc's AOL and Microsoft's MSN service.

Meanwhile, Yahoo continues its efforts at negotiation with Google and Time Warner's AOL Internet unit, even as it awaits Microsoft's decision, informed sources said.