Bharti hangs up on MTN merger talks

Mumbai: India's Bharti Airtel Ltd said on Saturday it had ended talks with South Africa's MTN Group after failing to reach agreement on the structure of what would have been the world's sixth-largest mobile operator.

Bharti, India's leading mobile operator, and MTN announced they were in exploratory discussions on May 5 to create an emerging markets mobile phone giant with over 130 million subscribers in around two dozen countries.

Media and analysts had speculated that Bharti, 30.5 per cent owned by Singapore Telecommunications, was eyeing a 51 per cent stake in MTN or would engineer a merger between the two firms in a deal that would value MTN at up to $50 billion.

Convoluted deal

Bharti said after an in-principle agreement had been reached, MTN had presented a new structure that it saw as a "convoluted way of getting an indirect control of the combined entity" and could not accept it.

"MTN's thinking about acquiring Bharti is obviously unacceptable," said Gajendra Nagpal, chief executive at Unicon Financial, a New Delhi-based investment advisory firm.

"The market is going to lift Bharti's shares tomorrow as there were fears of equity dilution in the company or it being highly leveraged due to the deal," he said.

Bharti shares rose 2.4 per cent to Rs836.80 on Friday in a Mumbai market that fell 1.5 per cent, although its shares are still down 6.4 per cent since the talks were announced. Shares in MTN ended at 155.65 rand on Friday, valuing it at around $38.5 billion.

In a statement, Bharti said a price for MTN shares had been agreed and over a dozen international bankers from the United States and Europe had given "confident letters of funding of over $60 billion".

"Discussions were on till late last night [Friday] without a breakthrough. Accordingly, Bharti has decided to disengage from the ongoing talks and has conveyed the same to MTN," Bharti said.

MTN finance director Rob Nisbet declined to comment.

MTN is sub-Saharan Africa's biggest mobile operator, and is present in some of the world's most lucrative markets, such as Nigeria, Cameroon, Ghana, Zambia and Uganda.

In South Africa's fiercely competitive market, MTN lags Vodacom, a venture of Telkom and Vodafone Plc, but it is seeing strong growth in Iran, for example, where oil money is spurring market growth and MTN has only one serious rival mobile operator.