Fitch watches Bharti's proposed acquisition of MTN

Rating agency Fitch Ratings has said that it that it would monitor closely the disclosure by Bharti Airtel Limited (Bharti, 'BB+'/Stable) that it is in discussion with the shareholders of South Africa-based telecommunications company, MTN Group Limited (MTN, national long-term rating 'A+(zaf)'/Stable), regarding the potential acquisition of a stake in by Bharti.

Fitch  said that in the event that Bharti does end up successfully acquiring a major stake in MTN, then depending on the extent of debt financing used to fund the acquisition, Fitch ratings on the Indian teelcom provider "could come under downward pressure."

Given the early stages of the discussions, the likelihood of other competitive bids being placed, and the associated uncertainties surrounding any investment in MTN or its terms, Fitch says it has refrained from taking any formal rating action at this stage but would take rating action as warranted by any developments.

"Should the discussions currently underway lead to Bharti acquiring a stake in MTN, Fitch would consider the investment involved, the financing structure and the level of cash flows from MTN that would support any incremental debt assumed by Bharti for the transaction prior to reviewing its ratings," the ratings agency said ina statement.

South Africa-based MTN is one of the largest global system for mobile communications (GSM) operators in Africa and the Middle East by number of subscribers. According to Fitch, at end-December 2007, MTN had 61 million subscribers across 16 African countries, five countries in the Middle East and operations in Cyprus.

MTN is also listed on the JSE Limited (JSE). Currently, 63.7 per cent of MTN's shareholding structure is free float, with the largest individual shareholders being Public Investment Corporation (13.5 per cent), Newshelf 664 Limited(13.0 per cent), and M1 Limited (9.8 per cent).