MTN's potential R66billion bid for Egypt's Orascom Telecom will have little meaning if the South African firm cannot secure a hefty stake in Orascom's money-spinning Algerian unit, analysts say.
Desperate to boost growth beyond its core markets of Nigeria, South Africa and Iran, MTN Group has been on the prowl for further acquisitions.
Analysts say that Djezzy, Orascom's Algerian unit and its top source of revenue, would give MTN a lucrative foothold in North Africa.
But for now, the Algerian government says "no deal", citing a law passed last year that would give the state or state-owned companies initial right of refusal on a 51percent stake in the event of a sale.
Without Djezzy, MTN would once again come up short in a bid for much-needed expansion.
"Algeria is what makes this attractive, not Burundi or Pakistan. If they don't get Algeria, I will be surprised if they carry on with the deal," said Steve Minnaar of Cape-based Abax Investments.
One solution may be for MTN to take a 49percent stake of Djezzy and management control. That would give the Algerian government a 51percent stake and fulfil Algiers' long-held desire to wrest Djezzy from Egyptian ownership.
"MTN has no problem with management control with a 49percent stake," said one banker.
"At issue is how much the Algerian government will pay for its 51percent share."
MTN said last week it was in talks to buy some or all of Orascom, which has the potential to make MTN the world's third-largest mobile phone operator, based on its latest subscriber numbers. - Reuters