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: The day after any failed deal is always a sour one. But not for the stock markets this time around as the shares of both Bharti and MTN have soared on Thursday, after they abandoned an alliance that makes business sense now, more than ever. The two companies have the chance of course to revive the talks later but without the coming together of several factors that too seems unlikely to go anywhere; even though the first cut remarks have blamed the current failure on the pace of regulatory changes.
It is also worth considering if the talks would have succeeded if dual listing were allowed by India’s finance ministry.
At heart of the Bharti MTN deal is the race to emerge at the top of the telecom markets in the emerging economies sweepstake. In the sweepstakes two markets are critical—India and Africa. The Indian and Chinese markets are mutually exclusive. So that leaves the African market as the prized catch.
Already the world’s largest telecom company Vodafone that established itself in Africa, Japan’s NTT DoCoMo too has moved in there and with Tata is ramping up its presence in the Indian market. Both China Mobile and China Unicom have pushed their presence in Europe and again Africa. The world it would seem is getting pretty limited for expansion.
In this cross continental sweep Bharti is about the only telecom leader that has not shown any inclination to expand overseas, till last year. The model it followed was based on targeting the white spots in the Indian market which made enormous sense as the nation went from one telecom milestone to the next. The 3G auctions would be the next chance for the company to stamp its pre-eminent position in the domestic market. In fact the abandonment of the MTN adventure can now give Sunil Mittal’s company the space it needs to bid aggressively for the 3G licences. This too will cost money and the Bharti war chest will come in handy here. The available dates for the 3G spectrum auction within this financial year was getting limited till last week as companies pursuing expansion plans were not sure they could cough up the sum needed ( Rs 3,500 crore of reserve price per bidder, per circle) to bid competitively. It is this perception that has driven up the price of Bharti shares on Thursday making it the best performer among...
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