Bharti shrugs off MTN bid report; stock takes hit

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A day after Bharti Airtel conceded that it is in talks with MTN, the Indian telecom major shrugged off reports appearing in London’s Financial Times newspaper that it had made an indicative bid of $19 billion for a 51% stake in the South African company.

“Bharti would like to clarify that it has not made any offer to acquire the whole or part of MTN. Therefore, speculation around a bid by Bharti in a section of the media is incorrect and misleading. Details of any transaction will be released promptly, if and when the parties reach agreement,” said a company spokesperson.

Should the transaction materialise on the lines of the FT report, however, it implies MTN is valued at $37 billion. That would make it the largest deal in the telecom sphere globally, as well as the biggest Indian acquisition overseas. That valuation could go up even further if Reliance Communications, Vodafone and China Mobile also enter the fray.

In February 2007, UK’s Vodafone, the world’s largest telecom company by revenues, acquired 52% stake from Hutch in its Indian venture, Hutch Essar, for $11 billion. Hutch Essar was then valued at around $18 billion.

According to FT, Bharti has secured $12 billion in financing from Goldman Sachs and Standard Chartered. “The two investment banks have each pledged to underwrite $6 billion of the amount that Bharti will need to purchase the controlling stake, people close to the situation said. Bharti is expected to fund the balance with an issue of equity, either directly to MTN shareholders or to institutions,” the daily said.

Markets reacted nervously to the development, with Bharti stock closing 5.29% down at Rs 846.60 on the BSE on Tuesday, after touching an intra-day low of Rs 840.35.