Though no official comment was available on the discussions with the finance minister, sources said that both chiefs were essentially garnering an informal nod for the deal and they also discussed the new FDI norms.
The new FDI norms have left sufficient room for Bharti Airtel to offload the promoters stake as allowed to an Indian-owned and controlled company. Unlike the previous norms where the investments held by foreign partners in the subsidiaries were also factored in while calculating the total FDI in the parent company, the new FDI norms consider a company Indian if Indian promoters hold a majority stake in it and the investments made by foreign companies in any joint venture or downstream venture will be treated as Indian.
Consequently, Bharti Airtel, which had 72% foreign equity in accordance with the old guidelines, now has only about 43% FDI as its Singaporean investor SingTel holds 31% in the company, apart from Vodafone's 4% stake routed through majority-owned Indian companies.
The two companies have been in negotiation for creating a $20-billion entity wherein Bharti Airtel would acquire a 49% stake in MTN while swapping its 36% stake. The deal involves a $13-billion cash transaction and $10 billion through share swap. The entity will have a footprint in over 24 countries and a subscriber base of over $200 million.
According to the statements released earlier by the companies, the discussions between the two operators pertained to MTN acquiring approximately a 25% post-transaction economic interest in Bharti for an effective consideration of approximately $2.9 billion in cash and newly issued shares of MTN equal to approximately 25% of the currently issued share capital of MTN.
Bharti will then acquire approximately 36% of the currently issued share capital of MTN from MTN shareholders for a consideration comprising ZAR 86 in cash and 0.5 newly issued Bharti shares in the form of global depository receipts (GDRs) for every MTN share acquired which, in combination with MTN shares issued in part settlement of MTNs acquisition of approximately a 25% post-transaction economic interest in Bharti, would take Bhartis stake to 49% of the enlarged capital of MTN.