Bharti Airtel, India’s largest private provider of integrated telecom solutions with over 100 million customers, has confirmed that it is in talks with MTN Group, the South African-based mobile operator with operations in 21 countries for the second time in a year for a possible merger. It should be remembered that Bharti had started talks to acquire MTN Group just over a year ago. However, with the global recession coming to light, the company’s valuations are down from their 2007 highs. Apart from this, both companies have surpassed the 100 million subscriber base, as well as revenue and profit. It should be noted that the structure of the agreement has changed this time.
About Bharti: Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises. The Bharti Group has a diverse business portfolio and has built global brands in the telecommunications sector. Bharti has recently ventured into the retail business as Bharti Retail Pvt. Limited. under an MoU with Wal-Mart for the cash and transportation business. He has successfully launched an international company with EL Rothschild Group to export fresh produce exclusively to the European and US markets and has launched Bharti AXA Life Insurance Company Ltd in a joint venture with AXA, a world leader in financial protection and management of heritage. Airtel comes from Bharti Airtel Limited, India’s first largest private and integrated telecom service provider with a presence in all 23 telecom circles. The mobile business provides fixed and mobile wireless services using GSM technology in 23 telecommunication circles, while the Airtel Telemedia Services business offers broadband and telephone services in 95 cities and recently launched India’s best direct-to-home (DTH) service. , Airtel digital TV.
About MTN: MTN Group is a South African-based multinational mobile telecommunications company with operations in many countries in Africa and the Middle East. MTN describes itself as “the leader in telecommunications in Africa and the Middle East” and since the beginning of 2007 is active in 21 countries. (Since 2004, Africa has been the fastest growing mobile phone market in the world.) The Group’s subscriber base amounts to 103.2 million in December 2008. MTN enjoys a dominant market share, being the highest in the world.
The deal: The structure of the deal is finally different from last year, allowing both companies to have mutual involvement. minority stakeholders may opt for cash payment. MTN and its shareholders are set to buy 33% of Bharti for $10 billion. Bharti, as part of the deal, is offering $4 billion in shares and $10 billion in cash to MTN and its shareholders. Bharti has already entered talks with eight banks, including Citigroup, for between $3 billion and $4 billion of the $5 billion he wants to raise as loans.
BizAddict Verdict: As with any major acquisition, Bharti has to suffer some initial pain in the form of debt and equity dilution before realizing the potential gains from acquisitions. As in the case of stock price movements, it is expected to be volatile until the deal closes; however, Bharti and his investors need to be patient and take a long-term approach to enjoy the fruits of the acquisition. We recommend a buy of this stock at current levels for a long-term outlook. If the deal goes through, Bharti will not look back for years to come.
