Mumbai: Shares in Bharti Airtel fell as much as 8.25% on Monday afternoon after the leading Indian mobile operator said its plan to buy a stake in South Africa’s MTN would initially dilute its earnings.
“Investors were initially excited when the news of the deal came out, but as the finer print surfaces the market is disappointed,” Gajendra Nagpal, chief executive of Unicon Financial Intermediaries, said.
Bharti, valued by the market at about $34 billion, had jumped 8.5% early after the company said it was in talks with South Africa’s largest mobile firm to a buy a 49% holding in MTN to create a major emerging markets telecoms group.
The announcement came a year after previous talks between the two companies broke down over who would control a merged entity.
Bharti said the potential value of what is a complex deal in which both firms pay cash and stock for stakes in each other, was more than $23 billion, making it the world’s biggest non-pharmaceutical M&A in 2009.
However, the shares erased their gains and fell after Bharti said a deal would dilute its earnings in the first year.
The stock was trading down 5.9% at Rs807.10 by 3:16pm, after falling to as low as 787, on the Mumbai exchange that was little changed. MTN shares in South Africa were up 4.7%.
Bharti said it expected earnings-per-share to pick up after the first year.
“These kind of deals take time to bear fruit. Look at the size of the company they will be creating. If you look at it from a long-term perspective, it is a step in the right direction,” Nagpal said.