After Mahatma, it's Bharti-MTN deal for India, SA: Economist

Vinod2070 · 26-05-09, 01:37 PM

After Mahatma, it's Bharti-MTN deal for India, SA: Economist

LONDON: Telecom giant Bharti Airtel's acquisition of MTN in South Africa, if successful, would be the biggest thing to happen to the two
countries since Mahatma Gandhi, says international business magazine Economist.

"It would be the biggest thing to pass between India and South Africa since Mahatma Gandhi moved from one country to the other," Economist said in a report on its website.

Earlier this week, Bharti Airtel and MTN said separately that the two firms have initiated "exploratory discussions" for a possible buyout of the South African mobile player. If successful, the deal could catapult Bharti among the world's five biggest mobile operators.

While Bharti has denied having made any bid so far, saying the talks are only exploratory as yet, a report in the British daily Financial Times said yesterday that the Indian firm has put in an indicative bid worth about 19 billion dollars for a controlling 51 per cent stake in Africa's largest mobile phone operator.

"That would make it the heftiest overseas acquisition ever made by an Indian firm, more than Tata Steel paid for Corus, a British steelmaker, and seven times the amount India invested in the whole of Africa over the ten years to 2004," Economist report said.

"The deal would unite the leading companies in the world's two most promising mobile markets. In neither market have penetration rates yet exceeded a third of the population. India is adding more subscribers per month than any other country," it added.

The report quoted figures from research firm Gartner as saying that in Africa, subscriptions are projected to grow by 11 per cent a year until 2011.

MTN has a bigger subscriber base than Bharti, a broader geographic reach, stronger revenues and higher profit, the report said, adding that Bharti, however, has a bigger market capitalisation but the gap has narrowed after the shares of Indian firm fell and that of African company rose amid the reports about the bid, the report noted.

"These numbers do not daunt Bharti, which has the confidence and clout of a company that has taken full part in an economic miracle. India added over 10 million mobile-phone subscribers in March alone, taking it past America, by some estimates, to become the second-biggest mobile market in the world," Economist said.

"Flush with this domestic success, Bharti has for years been harbouring international ambitions that extend far beyond its modest ventures in the Seychelles, Guernsey and Jersey... Buying MTN would allow Bharti to meet its international ambitions in full measure," it added.

The report said, however, that an outright takeover might prove too expensive and the "exploratory talks will therefore explore other, cheaper options: a merger, for example, or a joint-venture."

"That might still allow the two companies to aim for what financial analysts call synergies. Or as Gandhi put it, interdependence is and ought to be as much the ideal of man as self-sufficiency," the report said.

After Mahatma, it's Bharti-MTN deal for India, SA: Economist- Telecom-News By Industry-News-The Economic Times

Vinod2070 · 26-05-09, 01:37 PM

MTN bid won't trigger open offer by MTN for Bharti's shares

NEW DELHI: The proposed deal between Bharti Airtel and MTN will not violate the foreign direct investment norms. At the same time, as the deal
is not a pure acquisition, but getting completed under a scheme, a company source said it would not trigger an open offer by MTN for Bharti's shares as per SEBI norms.

In the deal, MTN and its shareholders put together will hold 36.37% in Bharti. In the first leg of the deal, Bharti will buy 36% of MTN's existing 1.89 billion shares from shareholders . The company will pay 86 rands per share and freshly issue half-shares of Bharti. That means that Bharti will issue 340 million of its shares to MTN's existing shareholders.

This will take Bharti's paid up capital from the existing 1.90 billion shares of Rs 10 each to 2.24 billion shares. At the same time, Bharti will also pay $7.03 billion as cash.

In the second leg of the deal, MTN will take 25% of the post deal equity capital of Bharti. For this, MTN will pay $2.9 billion to Bharti along with 25% of its current paid up capital. Now, MTN will acquire 25% of the post-deal equity capital, which has already become 2.24 billion shares after the first leg of transactions. This will enlarge Bharti's capital to 2.99 billion shares, of which 750 million shares will be issued to MTN.

As the paid-up capital of Bharti Airtel gets expanded by 57.37% to 2.99 billion shares from 1.9 billion shares, the holding of MTN's shareholders, who will be issued 340 million shares in the first leg of the transaction , will become only 11.37%. MTN will directly hold 25% in Bharti as per the second leg of the deal. The total holding of MTN and its share holders in Bharti will be 36.37%.

At this point, Singapore Telecom (SingTel) holds around 37.15% in Bharti. But in the expanded base, this will be reduced to 23.60%. Besides, FIIs' current holding in Bharti is 20.72%. In the expanded capital of the post deal situation , this will come down to 13.17%. Therefore, the total foreign holding in Bharti will be 73.14%, which is still below the permitted level of 75% in telecom sector.

Besides buying a 36% stake in MTN from its existing share holders in the first leg of the deal, Bharti is also acquiring 25% of the current capital of the South African major, which will be newly issued. Therefore, this will lead to expansion in the paid up capital of MTN by 25% from 1.89 billion to 2.36 billion. But, because of this, Bharti's holding in the expanded capital of MTN will be 48.8%.

At the end of the deal, MTN and its shareholders will hold 36.37% in Bharti. According to SEBI norms, if an acquirer takes more than 15% in a company , it must give an open offer to minority share holders to buy out their holdings in the company. But a senior merchant banker said that the deal is not purely acquisition but has gone through a scheme of arrangement, which has to be approved by the board. Hence, it will not require MTN to give an open offer.

However, MTN's shareholders will get $7.03 billion in cash. And Bharti will have to bear a net cash outgo of $ 4.14 billion as it will also get $2.89 billion cash from MTN. At the same time, MTN's shareholders will get 162 rand per share (each half-share of Bharti being valued at Rs 428.95) as against last year's offer of around 170 rand per share.

That's a significant markup on the present price of around 125 rand per share that's being quoted at present in the market.

MTN bid won't trigger open offer by MTN for Bharti's shares- Telecom-News By Industry-News-The Economic Times

Vinod2070 · 26-05-09, 01:38 PM

Mittal's dream of Bharti-MTN deal back on track

Recessionary times hold little fear for visionaries, especially if they happen to be leaders in the one industry where India is the world’s fastest growing market.

At a time when global giants are complaining about a cash crunch and putting ambitious plans on hold, Bharti Airtel has relaunched an audacious merger bid with South Africa’s MTN that could create a $61 billion transnational telecom Goliath with combined revenues of $20 billion and over 200 million subscribers across Africa, Asia and the Middle East.

The two firms on Monday revealed a potential transaction that involves a complex share swap deal (see graphic). It could ultimately be worth $23 billion to $29 billion, and will be discussed exclusively between the two firms until July 31. The ultimate strategic objective is to achieve a full merger of MTN and Bharti.

Bharti will buy 36% of MTN’s existing equity from MTN shareholders. It will pay for this in two parts—a cash portion of 86 rand ($10.34) per share totaling $7.03 billion; and half a Bharti Airtel share for every MTN share it gets. (about 34 crore shares worth roughly $6.2bn at Friday's price)

MTN will buy 25% of Bharti Airtel's post-deal equity through fresh issue of Bharti shares. It will pay for this again in two parts—$2.89bn in cash and fresh issue of MTN shares to Bharti equivalent to 25% of MTN's existing equity. (worth $7bn)

At the end of this complex swap, Bharti will hold about 48.8% of MTN's expanded equity, while MTN will hold roughly 36.4% of Bharti's enhanced equity. Bharti will then have to pay MTN a net cash amount of $4.14bn.

Mittal's dream of Bharti-MTN deal back on track - News in Pictures | Economic Times

Vinod2070 · 26-05-09, 01:39 PM

Deal takes Indian M&A story to dizzying heights

MUMBAI: By any yardstick, the Bharti-MTN deal, if it goes through, will usher in the next round of the Indian telecom M&A story. At an
estimated ticket size of $23 billion, this will be the biggest cross-border deal that India Inc has been involved in, and twice as much as what British telco Vodafone paid to acquire a little over half of Hutchison Telecom International’s Indian operations in early 2007.

If transactions like that of Hutch-Vodafone were inbound in nature, there were not too many big-ticket outbound telecom deals. Industry trackers point out that size and scale, which are inherent to the telecom industry globally, often hindered the process of an Indian telco going overseas to make that multi-billion transaction. That is now expected to change.

“Businesses like Bharti have an outstanding presence in India and it only makes sense to leverage on their capabilities in other markets,” said K Balakrishnan, CEO and MD, Lazard India. His firm was involved in some recent key telecom deals like NTT DoCoMo’s acquisition of a 26% stake in Tata Teleservices for $2.7 billion (Rs 13,070 crore), or AV Birla-owned Idea Cellular’s buyout of Spice Communications for Rs 2,700 crore.

Today, Bharti has over 100 million subscribers in India and has a small overseas presence in areas like Seychelles, Jersey Islands and Sri Lanka. The foray into these smaller markets came through a process of license bidding though the MTN deal could change a lot of things. MTN, which has 100 million subscribers across Africa, Middle East and Asia, will catapult Bharti to the top five in the global pecking order. According to another investment banker, Bharti’s foray into an emerging market like Africa is important. “It helps in the company adopting a de-risking strategy in case the Indian markets start to slow down,” he added.

From an outbound perspective, there have been instances of Reliance Communications’ (RCOM) acquiring Flag Telecom or Tata Communications buying out TGN though these were well under $300 million in terms of deal size.

Also Read → MTN's demand for majority stake derailed round one → Institutional investors play along → Bharti says no plans for rights issue for MTN deal → Bharti-MTN strategic fit, may put pressure on balance sheet: Experts

In one stroke, the Bharti-MTNL could change a whole host of things. “India is in the midst of a transition from a hyper to a normal subscriber growth rate and Indian operators will obviously have global aspirations. There will be some more operators looking at acquisitions overseas,” Gartner’s Singapore-based senior research analyst Madhusudan Gupta told ET.

The key will be how well set Indian operators are placed domestically. “At the end of the day, it comes down to scale and size before operators decide on going out to other markets,” added Mr Balakrishnan.

Last year, RCOM was involved in dialogue with MTN after Bharti decided not to pursue the deal. This signalled the appetite that the Anil Ambani company had for that big overseas buyout. Clearly, the big-bang telecom deal overseas will, for the moment, remain the bastion of the big boys.

http://economictimes.indiatimes.com/...ow/4577834.cms

Vinod2070 · 26-05-09, 01:39 PM

Deal takes Indian M&A story to dizzying heights

MUMBAI: By any yardstick, the Bharti-MTN deal, if it goes through, will usher in the next round of the Indian telecom M&A story. At an
estimated ticket size of $23 billion, this will be the biggest cross-border deal that India Inc has been involved in, and twice as much as what British telco Vodafone paid to acquire a little over half of Hutchison Telecom International�s Indian operations in early 2007.

If transactions like that of Hutch-Vodafone were inbound in nature, there were not too many big-ticket outbound telecom deals. Industry trackers point out that size and scale, which are inherent to the telecom industry globally, often hindered the process of an Indian telco going overseas to make that multi-billion transaction. That is now expected to change.

�Businesses like Bharti have an outstanding presence in India and it only makes sense to leverage on their capabilities in other markets,� said K Balakrishnan, CEO and MD, Lazard India. His firm was involved in some recent key telecom deals like NTT DoCoMo�s acquisition of a 26% stake in Tata Teleservices for $2.7 billion (Rs 13,070 crore), or AV Birla-owned Idea Cellular�s buyout of Spice Communications for Rs 2,700 crore.

Today, Bharti has over 100 million subscribers in India and has a small overseas presence in areas like Seychelles, Jersey Islands and Sri Lanka. The foray into these smaller markets came through a process of license bidding though the MTN deal could change a lot of things. MTN, which has 100 million subscribers across Africa, Middle East and Asia, will catapult Bharti to the top five in the global pecking order. According to another investment banker, Bharti�s foray into an emerging market like Africa is important. �It helps in the company adopting a de-risking strategy in case the Indian markets start to slow down,� he added.

From an outbound perspective, there have been instances of Reliance Communications� (RCOM) acquiring Flag Telecom or Tata Communications buying out TGN though these were well under $300 million in terms of deal size.

Also Read → MTN's demand for majority stake derailed round one → Institutional investors play along → Bharti says no plans for rights issue for MTN deal → Bharti-MTN strategic fit, may put pressure on balance sheet: Experts

In one stroke, the Bharti-MTNL could change a whole host of things. �India is in the midst of a transition from a hyper to a normal subscriber growth rate and Indian operators will obviously have global aspirations. There will be some more operators looking at acquisitions overseas,� Gartner�s Singapore-based senior research analyst Madhusudan Gupta told ET.

The key will be how well set Indian operators are placed domestically. �At the end of the day, it comes down to scale and size before operators decide on going out to other markets,� added Mr Balakrishnan.

Last year, RCOM was involved in dialogue with MTN after Bharti decided not to pursue the deal. This signalled the appetite that the Anil Ambani company had for that big overseas buyout. Clearly, the big-bang telecom deal overseas will, for the moment, remain the bastion of the big boys.

Deal takes Indian M&A story to dizzying heights- Telecom-News By Industry-News-The Economic Times

EnlightenedMonk · 26-05-09, 02:53 PM

Let's not get too carried away and praise ourselves before the deal goes through...

Just last year the same deal had fallen through because of what people believe to be interference from Reliance Infocomm...

Also, the global dynamics have changed significantly since the last time and our neighbours are gaining a lot of unwarranted power and leverage... China might try and derail the deal and make sure it doesn't go through because China wants to continue its dominance of the African continent and treat them as slaves...

Vinod2070 · 26-05-09, 02:57 PM

The times are different and this time Bharati is in a stronger position because India is doing well as a Telecom market despite the slowdown.

Yes, there is nothing to celebrate now. Just a story that we should track.

EnlightenedMonk · 26-05-09, 03:01 PM

If we can pull this off, this will be a great slap on the face of the dragon...

threadbrowser · 26-05-09, 03:17 PM

Ah, so thats why my DSL rates are so high. Empire building as usual.
Why dont they improve their pathetic broadband speeds and customer service instead.

p2prada · 26-05-09, 03:40 PM

I have no complaints regarding Airtel's customer service. But, I really have a thing or 2 to say about the Broadband speeds though.

Anyways, I don't see how we will be slapping the face of the Dragon with that. Sooner or later, we were to enter Africa. If not Airtel, then Tata or Rel would have done that.

EnlightenedMonk · 26-05-09, 05:12 PM

p2, I am sure that our neighbouring country is extremely jealous of us and I'm sure that China Telecom will try and create problems in the deal... Mark my words...

p2prada · 26-05-09, 05:15 PM

Well, they can try. But, Airtel has invested in a company that has a better control over Africa's telecom sector. China will only be a competitor.

EnlightenedMonk · 26-05-09, 05:24 PM

Don't underestimate the slyness of the Chinese, my friend... just a few months ago, they had put pressure on the South African government and denied a visa to the Dalai Lama for attending a peace conference in South Africa...

The Chinese have big tentacles in Africa and they won't shy away from using that to give themselves an unfair advantage...

p2prada · 26-05-09, 07:13 PM

Dalai Lama is an entirely different game. The Chinese are no doubt ahead in Tech as well as subscriber base. But, that doesn't mean we can't even the odds. If its oil or natural gas its a different ball game. if its telecom, i doubt China can do much.

Vinod2070 · 26-05-09, 07:15 PM

The top 2 companies with the most subscribers in a single country are Chinese. Don't underestimate them.

After Mahatma, it's Bharti-MTN deal for India, SA: Economist

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