By Devidutta Tripathy / Reuters
New Delhi: Shares in Bharti Airtel fell almost 5% on 6 May amid concern about how India’s top mobile operator may fund a potential multi-billion dollar takeover of South Africa’s MTN Group.
Bharti and MTN said on 5 May that they were in talks which may or may not lead to a deal. If successful, it could be India’s biggest foreign acquisition, topping Tata Steel’s $13 billion buy of Anglo-Dutch steelmaker Corus Group last year.
The Financial Times, quoting unnamed insiders, said Bharti had put in a bid for 51% of MTN that valued MTN at around $37 billion. The paper said Bharti had secured $12 billion from banks to fund the deal.
Analysts said Bharti shares also weakened on worries that its interest in MTN could spark a bidding war and push up the price.
“It’s a very bold move, an audacious move,” said Harit Shah, telecoms analyst at Mumbai-based Angel Broking. “No doubt MTN will give them a global footprint, but it may not be good for shareholders as China Mobile and Vodafone are reported to be also interested in MTN and they may end up in a bidding war,” he added.
The Financial Times said Britain’s Vodafone Group, China Mobile and India’s Reliance Communications were also likely to be interested in MTN.
Two months ago, Vodafone denied a report it had been in talks with MTN about acquiring a stake in its international operations.
MTN has a market value of about $36 billion, and at end-March had 68.2 million subscribers in 21 countries in Africa and the Middle East. Bharti is valued at about $42 billion and has 62 million subscribers. Reliance Communications has a market capitalisation of around $28 billion.
By 0727 GMT, Bharti shares were down 3.2% at Rs865 in a broader Mumbai market off 0.5%. The shares earlier dropped 4.9% to their lowest since 25 April, the day that news of a possible bid was first reported.
In Johannesburg, MTN shares opened 10% higher on Tuesday.
Asked if Bharti was eyeing all or just part of MTN, Joint Managing Director Akhil Gupta told Reuters: “As we have said, we are in exploratory talks. Some speculation has to go on. As per international law, we are not allowed to speak about it,” he said, when asked about media reports on the bid price.
Angel Broking’s Shah doubted Bharti was interested in buying all of MTN. “MTN’s shareholding is also well distributed, with the biggest shareholder, Alpine Trust, holding just 23%. Maybe they are looking at just a strategic stake,” he said.
Other analysts said Bharti could bid for MTN through a consortium.
“MTN’s financing on a standalone basis will be tough; a consortium-based approach along with a strategic partner like SingTel may be a viable alternative,” HSBC Securities analysts Rajiv Sharma and Tucker Grinnan wrote in a report.
Singapore Telecommunications Ltd, Southeast Asia’s largest phone firm, owns 30.5% stake in Bharti. Singapore state investor Temasek owns 5% and Vodafone, which controls Vodafone Essar in India, has 4.4%.
UBS said there was low probability of an all-cash acquisition of 100% of MTN. “A partial offer or Bharti taking a strategic stake looks more likely,” the brokerage said.
MTN said in a notice to the Johannesburg Stock Exchange that it was being advised by Merrill Lynch and Deutsche Bank, while the FT said Standard Chartered was advising Bharti.