South Africa’s MTN Group Ltd looks the reluctant bride. The failure of the $36 billion (around Rs1.5 trillion) telecom operator’s talks with India’s Bharti Airtel Ltd doesn’t bode well for Reliance Communications Ltd, India’s second largest mobile operator by subscribers, with which MTN is now in exclusive talks. MTN has shown itself shy about being taken over by one Indian family-controlled empire. It now looks like it wants to be the groom with another.
Bharti claims it terminated talks with its larger South African counterpart after MTN “presented a completely different structure to what was agreed”. Instead of what would effectively have been a takeover of MTN, the South African group proposed Bharti become a subsidiary of MTN. The move would have required billionaire Sunil Bharti Mittal and co-investor Singapore Telecommunications Ltd to swap their controlling stake in Bharti Airtel for a large stake in MTN.
The rumour mill suggests Reliance might be willing to do what Bharti would not. It’s certainly hard to see MTN being any keener on a takeover by Reliance, which is smaller than Bharti. However, it’s difficult to imagine Anil Ambani, who controls the parent Reliance-Anil Dhirubhai Ambani Group, genuinely ceding control of his flagship listed company.
Reliance held talks with MTN a year ago, but failed then to make any progress. Since then, Anil Ambani has been making a concerted effort to push his empire further into public and international markets. Reliance Power was floated late last year in India. Globalcom, the international division of Reliance Communications, is eyeing a £6 billion (Rs50,880 crore) London listing. Reliance also just won the auction for troubled UK wireless network operator Vanco Plc.
Bharti and Reliance offer MTN roughly the same advantages: scale and sharing management expertise. A combination with either would create an emerging market telecom giant with operations in India, Africa and West Asia. Yet, bankers are going to have to get really creative with the ownership structure if they want to get a deal signed.
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