BL: Bharti Scraps MTN Bid After Differences Over Control (Update2)
By Archana Chaudhary and Harichandan Arakali
May 24 (Bloomberg) -- Bharti Airtel Ltd., India's biggest mobile-phone company, abandoned plans to acquire MTN Group Ltd. after differences with the South African company over control.
Bharti and MTN, Africa's largest mobile-phone company, reached a preliminary agreement on May 16, New Delhi-based Bharti said in an e-mailed statement today. The proposal was submitted to Johannesburg-based MTN's board on May 21, it said.
``MTN has now presented a completely different structure, from what was agreed,'' Bharti said in the statement. ``Bharti has decided to disengage from the ongoing talks and has conveyed the same to MTN.''
The collapse of the talks ends Bharti Chairman Sunil Mittal's plans to unite two companies with a combined market value of more than $70 billion that would offer mobile-phone services to 1.7 billion people stretching from the Cape of Good Hope to the Himalayas. Bharti's departure may open the door for potential bidders such as Emirates Telecommunications Corp.
``This is final, it's over,'' said Senjam Raj Sekhar, a Bharti spokesman. The company isn't open to further negotiations with MTN, he said. Pearl Majola, a spokeswoman for MTN in Johannesburg, said the company will update shareholders on the latest developments ``as the market opens'' on May 26.
MTN spokeswoman Nozipho January Bardill said Chief Executive Phutuma Nhleko has said before that MTN is open to talks with other companies and that this continues to be the case.
New Structure
Bharti said it ended the talks late yesterday after MTN presented a new structure in which Bharti Airtel would become a subsidiary of the South African company. The Bharti family and Singapore Telecommunications Ltd. would have had to exchange their majority stake in Bharti Airtel for a controlling stake in MTN, according to the structure, Bharti said.
MTN shares have risen 4.7 percent and Bharti has fallen 6.3 percent since May 5 when the two companies first publicly disclosed that they were in preliminary discussions. MTN was unchanged at 157 rand in Johannesburg trading yesterday, valuing the company at 292.9 billion rand ($38 billion).
``This is probably good for Bharti,'' said Jitender Kumar who helps manage an equivalent of $93 million in Indian equities at Taurus Asset Management Ltd. in New Delhi. ``I never thought it was that simple, especially if you looked at the price that Bharti may have had to pay.''
The Indian operator said it had tied up $60 billion from banks in the U.S. and Europe to fund the deal.
Indian Focus
Dropping the bid will allow Bharti to focus its investments on maintaining dominance in India's market and fend off competition from Reliance Communications Ltd. and Vodafone Group Plc. Mumbai-based Reliance, India's second-largest operator, is rolling out a second network this year.
Bharti rose 2.4 percent to 837.65 rupees in Mumbai yesterday, valuing the company at 1.59 trillion rupees ($37 billion). The stock has declined 16 percent this year.
For MTN, the end of the Bharti bid ``will be perceived as bad news and the share price will initially come under pressure,'' said Wayne McCurrie, who helps manage the equivalent of $12 billion at Momentum Group Ltd. in Johannesburg. ``It does, however, open up an opportunity for other possible bidders.''
Deutsche Telekom AG and Russia's OAO VimpelCom are considering whether to bid for MTN, India's Business Standard reported on May 21, citing unidentified bankers. Spokesmen at Bonn-based Deutsche Telekom and Moscow-based VimpelCom declined to comment that day.
Etisalat, Reliance
Reliance Communications, the company of Indian billionaire Anil Ambani, is in talks again to acquire a stake in MTN, Business Standard reported today. Calls to the cellphone of Mumbai-based Reliance spokesman Gaurav Wahi weren't answered today.
Emirates Telecommunications, or Etisalat, the United Arab Emirates's biggest phone company, said this month it's evaluating MTN. Vodafone Group Plc, the world's largest mobile-phone company, said May 12 it wouldn't bid for MTN.
Ahmed bin Ali, a spokesman for Etisalat in Abu Dhabi, said the company had no comment on the end of Bharti's negotiations or how that may affect its assessment of MTN.
MTN chief executive Nhleko has driven expansion northward into 21 countries throughout Africa and the Middle East, covering a region with a combined population of more than 500 million people. MTN expects its number of subscribers to rise 36 percent to about 83.4 million this year, helped by gains in Nigeria and Iran.
Beyond Africa
MTN is also looking for acquisitions beyond Africa and the Middle East even as it struggles to match demand for mobile phones in Africa, where the global commodities boom is boosting economies and raising demand for the handsets. Only about 3 in every 10 people in Africa have mobile phones, according to Middle East & Africa Wireless Analyst.
Bharti added more customers last year than Reliance and Vodafone Essar Ltd., the Indian unit of Vodafone Group. Bharti's market share is about 24 percent in India, which surpassed the U.S. this year as the largest mobile phone market after China.
Mittal has streamlined his business by awarding contracts to providers including International Business Machines Corp., Ericsson AB and Nokia Oyj to manage Bharti's global system for mobile communication, or GSM, networks. He is spending more than $3 billion this year to expand into rural India.
Bharti's adviser has been Standard Chartered Plc, while Merrill Lynch & Co. is advising MTN. Goldman Sachs Group Inc. advises SingTel, Southeast Asia's largest telephone company, which owns 30.5 percent of Bharti.
To contact the reporters on this story: Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net; Harichandan Arakali in Bangalore at harakali@bloomberg.net;
Last Updated: May 24, 2008 10:42 EDT
AI
