Bharti's proposed acquisition of MTN runs into pre-condition hurdle

09 May 2008

For long Africa has been derided as a continent of the poor with very few global companies wanting a presence there. All that has changed in the recent past with the explosive growth of several mineral-rich economies in the continent.

After the Tata Group, India's leading telecommunications operator seems to be the latest entrant seeking a share of the African pie. (See: Bharti in talks for a controlling stake in South Africa's MTN)

Bharti Group's Sunil Mittal is currently in London negotiating with the top management of South Africa's leading telecommunications company MTN for a controlling stake, reports of which first broke only days ago when the London-based Financial Times reported that Bharti was considering offering $20 billion for a 51-per cent stake in MTN.

If Mittal succeeds, this would be the largest overseas acquisition ever by an Indian firm. However, both sides emphasize the tentative nature of the talks, while The Economist magazine noted, "If anything, Bharti would be marrying up," as MTN has more subscribers, higher revenues, and broader geographic coverage.

Putting things into perspective, MTN's market cap of $38 billion compares with $42 billion for Bharti, although its 68 million wireless subscriber base is larger than Bharti's 62 million. Also, MTN is active in 21 countries - a much larger footprint than Bharti's presence in India, and also reported higher revenues.

According to reports the African telecommunications services provider has put forth a condition that its CEO and group president, Phuthuma Nhleko should be the chief executive of an integrated management committee, combining top executives of both the firms, in case the deal goes through.

Mittal is said to be agreeable to this, but final word is not expected before Friday.
Moreover, Mittal would need to abide by race laws that require a 25-per cent equity ownership and 40 per cent management control by blacks.