Bharati Mtn Deal Off

[Himanshu Singh 19]

for second time in as many years the deal is off. i suspect Mtn is a jinxed company for indian telcos. poor mittal.

[Greatest 55]

September 30, 2009

Bloomberg

Bharti Airtel Ltd., India’s largest wireless operator, and South Africa’s MTN Group Ltd. called off merger talks, scrapping a proposed $23 billion transaction that would have been the world’s biggest cross-border deal this year.

Abandoning talks for the second time in two years, Bharti said the structure of the deal failed to meet the approval from the South African government. South Africa’s treasury said the talks ended on a mutual agreement by the companies to disengage.

The structure “needed an approval from the government of South Africa, which has expressed its inability to accept it in the current form,” Bharti said in an e-mailed statement. Bharti asked for an opportunity to revive the deal after the deadline for exclusive talks ended today.

Bharti on May 25 had offered 86 rand ($11.4) in cash and half a stock for each MTN share for a 49 percent stake. As part of the transaction, MTN, Africa’s biggest mobile-phone company, and its shareholders would have acquired 36 percent of the New Delhi-based operator. Bharti said at the time the value of the transaction may exceed $23 billion.

The decision to scrap talks will set back the operators’ efforts to create a company that would have helped them trim costs and challenge Vodafone Group Plc in Africa and India, where the world’s biggest mobile-phone company has been targeting growth. Bharti’s Chief Executive Officer Sunil Mittal is facing increasing competition at home from Vodafone and Japan’s NTT DoCoMo Inc. and MTN wants to expand outside Africa.

“It will be a huge setback” to Bharti’s aim of becoming a global player, said Romal Shetty, executive director for telecommunications at KPMG’s Indian unit. “The ability to leverage things will reduce, it will take time.”

Government Objection

South Africa’s rand fell the most in nearly two months as speculation ended on currency purchases to fund the deal. The rand depreciated as much as 2.5 percent to 7.6158 per dollar, the biggest drop since Aug. 6. MTN shares fell as much as 3.5 percent before they were suspended.

The South African Treasury said in a statement that the government didn’t block the deal. The proposed terms of the deal had required certain approvals as the planned structure was “outside the current exchange control regulatory framework for such transactions,” it said.

Earlier today, Communications Minister Siphiwe Nyanda said in Johannesburg that the government wants MTN to remain a South African company with local management,

“It would be sad if we saw this entity move into the hands and management of foreign nationals,” Nyanda said. “Its management must remain South African.”

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