MTN OPTIMISTIC OF VENTURE INTO ASIA
MTN's ambitions to enter the Asian market were resurrected yesterday when it announced that it had resumed talks with Bharti Airtel.
In April last year MTN and Bharti, India's largest cellular service provider, began negotiations for the sale of a stake in the South African company.
The talks were cancelled when the companies failed to reach agreement on the terms of the deal.
MTN soon entered into talks with India's second largest operator, Reliance Communications. This deal, however, was squashed amid rumours of a feud between Reliance chairperson Anil Ambani and his older brother Mukesh.
Yesterday both MTN and Bharti released independent announcements outlining an arrangement where Bharti would acquire a 49percent stake in MTN and in turn MTN would acquire 36percent in Bharti.
Out of this 36percent of Bharti shareholding, 25percent would be held by MTN and the remainder held directly by MTN shareholders.
The two companies have agreed to discuss the potential transaction exclusively with one another until the end of July.
The deal is aimed at giving MTN a major inroad into the Asian market (India, Sri Lanka and Singapore), while offering Bharti a significant presence in 21 African and Middle East markets.
In a JSE cautionary announcement, MTN chief executive Phuthuma Nhleko expressed his excitement at the deal. He said: "It addresses our strategic imperative of becoming one of the pre-eminent emerging market telecommunications companies with leading positions in three of the fastest growing wireless markets globally with no overlapping footprint."
The transaction would see both companies having a certain level of influence in each other's operations and decision-making processes, but MTN has made assurances that it would not result in any job losses.
Sunil Bharti Mittal, chairperson and managing director of Bharti, said the discussion was still at an early stage and was not guaranteed to lead to a transaction.
He said the structure and terms could be adjusted to reflect further discussions between the parties, lending banks and regulators.
"We are delighted at the prospect of partnering with MTN to create an emerging market telecom powerhouse," he said.
Lindsey McDonald, Frost & Sullivan senior ICT analyst, said: "I think the important thing is this time there is a clear definition of what MTN and Bharti are looking for.
"Last time, Bharti wanted to buy MTN, but MTN wanted to buy Bharti. MTN management didn't want to give up steering the company in the direction they think best."