Bharti-MTN merger was dead weeks ago

The fate of the Bharti-MTN deal was sealed by the South African government's treasury as long as three weeks back. According to CNBC-TV18, the South African treasury wrote to MTN group chief executive Phuthuma Nhleko on 11 September insisting that for the deal to go through, the merged company should remain domiciled in South Africa and should be listed in both countries, which is not possible under current Indian laws.

For a second time, MTN, South Africa's largest telecom company, and Bharti Airtel, India's biggest mobile phone operator, were exploring a deal that could lead to a merger between the two companies resulting in a $23 billion entity. Earlier, in May 2008, the two companies had initiated talks to explore the possibility of a similar deal.

The South African government's pension fund, Public Investment Corp, holds 21 per cent stake in MTN and the government was under intense pressure not to give a go-ahead to the deal as MTN would lose its South African identity. Members of the treasury had travelled to India on 24 September to understand the regulatory and legal framework of Indian laws and deliberate upon hurdles to the deal.

Sources say the treasury had raised the dual listing issue as early as mid-August, and had made it clear that it would be a no-deal in case India declined the request for an okay to the dual listing structure.

But, for India, a dual listing structure would have rendered its foreign direct investment policy infructuous and would have led to huge tax losses to the government, sources told the TV channel.

A dual listed company would have weakened the oversight of market regulator Securities and Exchange Board of India, as it would not be able to monitor overseas stock exchanges - MTN is currently listed on the Johannesburg Securities Exchange (JSE) - they added.