New Delhi: India’s top mobile phone services firm by customers Bharti Airtel Ltd’s failure to woo South Africa’s MTN Group Ltd may be a missed opportunity, but the Indian firm will still seek buys overseas as it looks to export its low-cost, high-volume model.
Smaller deals would be preferable as they are more likely to succeed and would not stretch Bharti’s finances as much as the $20 billion (Rs85,800 crore) or so it could have spent for a majority of MTN. “I don’t think it’s the end of the road for Bharti in terms of acquisitions, but perhaps now they will be looking for smaller companies close to home,” said Andrew Jobson, an analyst at Daiwa Institute of Research in Hong Kong.
Bharti ended talks with MTN after failing to agree on a structure for a group that would have been the world’s sixth largest mobile operator with over 130 million subscribers.
Bharti said it is still keen to expand and be a multinational telecom giant. Funding offers of $60 billion during the MTN talks show financing should not be a problem.
Egypt’s Orascom Telecom Holding SAE and Nasdaq-listed emerging markets firm Millicom International Cellular SA “may be interesting given their reasonable scale and exposure to growth markets” according to Merrill Lynch analyst Reena Verma Bhasin. “We think the African markets are fairly consolidated and MTC Zain, which ranks No. 2 in Nigeria (behind MTN) may not be available,” she said in a research note.
Bharti, 30.5% owned by Singapore Telecommunications Ltd, has more than 64 million subscribers and is a leader in the world’s fastest growing mobile market, with over 17 million more users than its closest rival.
Millicom is valued at almost $12 billion and Orascom at $15.5 billion. Even allowing for a takeover premium, the market would be more comfortable with that sort of number than the estimated $50 billion valuation put on MTN, about 25% more than Bharti’s market value. Orascom, which also operates in Algeria, Bangladesh, Tunisia, Pakistan and Zimbabwe, has more than 74 million subscribers. A tie-up with Bharti would rank it sixth in the world.
Millicom, controlled by Swedish investment firm Kinnevik ST, has interests in 16 countries in Central and South America, Africa and Asia and had 26 million users at end-March.
Overseas expansion would offer Bharti a hedge against an expected slowdown in growth in India after 2010, when more than 40% of the population is expected to own a mobile phone and average revenue per user will come under pressure as operators have to venture into less-affluent rural areas.