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Anticlimax: India’s Bharti Airtel & Africa’s MTN Disengage Merger Talks

The high-profile M&A talks between operators Bharti Airtel and MTN Group for a $23 billion merger deal have been dismissed yet again. Airtel informed the BSE that talks would be broken off when the exclusivity period ended yesterday and gave the reason as the failure to obtain a necessary approval by the South African government.

This is the second time that a merger between the two giants has been called off – last year, Reliance Communications also held discussions on a potential merger with MTN. Airtel has left the door open for future talks.

Our Take

That the deal did not go through was quite a surprise, since we expected talks to be extended further. We didn’t think the deal was worth going through with, since a merger between Bharti and MTN would have created an elephant of sorts. Though they may be seen as equals, keep in mind that MTN operates in 21 countries, and has 21 governments and regulators to deal with: a merger between the two large companies would have been not just a case of complex structuring, but also complicated management: in turn, it could have ended up slowing down decision making in an increasingly competitive Indian market.

In India, Airtel needs to focus on the high end subscriber market: the high ARPU, post-paid subscribers account for a significantly large chuck of telecom operator revenues, and given Airtel’s track record with customer service, we think they’re likely to benefit most from mobile number portability – maybe not in terms of market-share, but in terms of revenue market-share. To retain its position as a premium player in India, and to drive incremental usage among post-paid subscribers, Airtel will now have the resources to bid for the 3G spectrum, instead of diverting funds and management bandwidth in managing a complex merger arrangement.

Bharti Airtel’s statement:

This refers to our discussions with MTN Group Limited (“MTN”). Bharti and MTN have decided to disengage from their discussions when the exclusivity period ends on September 30, 2009.

The alliance planned between Bharti and MTN was a vision based on solid fundamentals, which had the potential of creating an emerging markets telecom giant and the third largest telecom company in the world. Substantial synergies could have been captured with this proposed transaction.

The broad structure being discussed by the two sides had taken into account the sensibilities and sensitivities of both companies and both their countries. Bharti and MTN are national champions and the proposed deal structure took into account their leadership in their respective geographies to ensure continuity of business – including listing, tax residencies, management, brand etc. This transaction would have been the single largest Foreign Direct Investment into South Africa and one of the largest outbound FDIs from India. The deal would have been a significant step in promoting South-South cooperation – a vision of the two countries.

This structure needed an approval from the government of South Africa, which has expressed its inability to accept it in the current form. In view of this, both companies have taken the decision to disengage from discussion.

Bharti has enjoyed its engagement with the MTN management and its Board; and wishes them continued success. We hope the South African government will review its position in the future and allow both companies an opportunity to re-engage.

Bharti is grateful to the various Indian government authorities, in particular the Minister of Finance, the Minister of Commerce and Industry and the Minister of Corporate Affairs. We express our profound gratitude to the Hon’ble Prime Minister of India for his strong support to what could have been a transformational partnership.

Bharti will continue to explore international expansion opportunities that are consistent with its vision and bring value to its shareholders.


— Bharti Airtel & MTN Extend Talks Till August 31st
— Airtel & MTN Renew Merger Talks: What Has Changed?

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