Hong Kong/Singapore/Johannesburg: Bharti Airtel Ltd, India’s biggest mobile phone company, and South Africa’s MTN Group Ltd have reached a $24 billion (Rs1.16 trillion) preliminary agreement to buy each other’s shares, the first step in a planned merger, three people familiar with the matter said.

Bharti sweetened its bid to buy 49% of MTN by increasing the cash portion of its $14 billion offer, the people said, asking not to be identified before an announcement this month. MTN, Africa’s biggest wireless company, and its shareholders are poised to acquire 33% of Bharti for about $10 billion, they said.

Cash incentive: Sunil Mittal. Madhu Kapparath/Mint

“We would like to categorically deny that any such agreement has been reached between the two companies," the company said in an emailed release. “The discussions are still on. As and when there is any development, we would be happy to share the same with the media."

The world’s biggest cross-border deal this year would pave the way for the creation of a mobile phone carrier with annual sales of $20 billion and 200 million wireless subscribers from Johannesburg to Mumbai. The accord would need the approval of 75% of MTN’s shareholders, some of which have said Bharti should raise its offer from a bid disclosed in May.

Singapore Telecommunications Ltd (SingTel) which owns about 30% of Bharti, agreed to invest as much as $3 billion to buy Bharti shares, according to the people.

SingTel said in an email the company doesn’t comment on market speculation, as did Marina Bidoli, a spokeswoman at Johannesburg-based MTN.

Bharti agreed to give $4 billion in stock to two of MTN’s biggest shareholders, M1 Group and South Africa’s Public Investment Corp. Ltd, while offering remaining shareholders $10 billion in cash, the people said.

Bharti had said on 25 May it offered 86 rand (Rs559 today) in cash plus half a Bharti stock for each MTN share for a 49% stake, while Africa’s largest mobile phone firm and its shareholders would acquire 36% of the New Delhi-based operator.

Bharti had said at the time the value of the deal may exceed $23 billion.

Bharti fell 3.5% to close at Rs409.35 in Mumbai trading, trimming its gain this year to 14%. MTN rose 1.5% in Johannesburg trading to 126.50 rand as of 2.38pm.

Shareholders of about 20% of MTN have said they didn’t support the deal at Bharti’s initial bid. Some demanded an all-cash offer.

Coronation Fund Managers Ltd, which holds about 5% of MTN, had said on 20 August it wanted about 31% more for its stake in Africa’s largest wireless provider. The fund wanted an all-cash offer, instead of Bharti’s proposed stock-and-cash bid, it said then.

MTN chief executive officer Phuthuma Nhleko has been looking to expand in markets outside the continent and said in March the company wanted to make a meaningful acquisition this year. The company last year failed to close deals with Bharti and its nearest Indian rival Reliance Communications Ltd (RCom).

The combined operation will help Bharti chairman Sunil Mittal increase overseas sales at a time when RCom and Vodafone Group Plc are narrowing its lead in India. Competition is also intensifying with the entry of more foreign rivals, including Japan’s NTT DoCoMo Inc. and Norway’s Telenor ASA.

Bharti added a record 8.44 million users last quarter, 60% of them in rural and semi-urban areas, CEO Manoj Kohli said on 23 July. The additions boosted the operator’s total wireless subscribers to 102.4 million, more than the combined populations of Spain and the UK.

Vodafone’s Indian unit and RCom added customers at a faster pace in the quarter, according to the latest available figures from the Telecom Regulatory Authority of India, to increase their market shares to 18% and 19%, respectively, while Bharti’s proportion was unchanged.

Bharti hired Barclays Plc and Standard Chartered Plc for the agreement, while Bank of America Corp. and Deutsche Bank AG advised MTN. Goldman Sachs worked with SingTel, South-East Asia’s largest telephone company.