SingTel may join Bharti Airtel in MTN bid

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New Delhi, May 7: Singapore's telecom giant SingTel, which holds over 30 per cent stake in Bharti Airtel, may join the Indian mobile operator as a co-buyer in the bid to acquire South Africa's MTN, analysts said.

By virtue of its 30.5 per cent stake in Bharti Airtel, SingTel would anyway have an indirect interest in MTN's buyout by the Indian firm, but there is a "reasonable probability" that the Singapore firm gets directly involved as a co-buyer, analysts at Citigroup Global Markets said in a research note to their clients.

Earlier this week, MTN and Bharti announced separately that they have initiated "exploratory discussions" for a possible acquisition of the South African firm.

"SingTel is the largest shareholder in Bharti with a 30.5 per cent stake and consequently has interest in this transaction anyway," Citigroup's Anand Ramchandran wrote in the research note.

"That said, given the size of any potential acquisition, we see a reasonable probability that SingTel gets directly involved with Bharti as a co-buyer as well," the note said. Terming Bharti and MTN as "two equal-sized entities in market value," Citigroup said that MTN's market cap of 35 billion dollars compares with 42 billion dollar for Bharti.

"MTN's 68 million wireless subscriber base (across Africa) as of March 2008 compares with Bharti's 62 million as of the same date," it noted adding that MTN's 4.1 billion dollars in EBITDA for year ended December 2008 compares with 2.8 billion dollar for Bharti in the same period.

If successful, the deal could catapult Bharti among the world's five largest mobile phone operators. While Bharti has so far maintained having not put in any bid as yet, a report in the British daily Financial Times said yesterday that Bharti has made an indicative bid of 19 billion dollars for a 51 per cent stake in Africa's largest mobile firm.

Based on these figures, it would be the largest overseas buyout by any Indian company ever.

Analysts at Citigroup also noted that concerns about overpayment for the deal could reflect in the share prices of the interested acquirers, as has been the case in previous deals like Tata-Corus.

"History indicates Markets worrying about overpayment and dilution first before looking at synergies and extended growth opportunities... We see deal structure, value for price and funding in any transaction as all key to immediate stock reactions," Citigroup research note said.