S&P said the swap could result in higher country risk and leverage, but within our tolerance level. The combined entity would also become a leading emerging market telecom operator. Bharti is expected to use its cash reserves of Rs 11,000 crore (around $2.5 billion) to help bankroll the deal, for which the two companies have entered into exclusive negotiations up to July 31.
In response to a query from FE, Bharti said it wouldnt need an onerous amount of funding. The company is one of the lowest leveraged in the country. It would be a mix of debt, stock and cash options, it said. Standard Chartered Bank is the companys financial advisor to the deal.
Last year, Bharti had received expressions of support from 12 bankers across the globe to raise funds of around $60 billion to buy out MTN. The company also said the latest deal would not trigger an open offer and was well within the regulatory frameworks of both South Africa and India.
The Bharti-MTN deal will ease the route for companies hoping to take advantage of the latest foreign investment guidelines, specifically Press Notes 2, 3 and 4 issued in February. Concerns expressed by RBI will now be papered over. Officials at the Department of Industrial Policy & Promotion asserted that the deal just needed to comply with the recent Press Notes.
One of the key constructs of the Bharti-MTN swap deal is the relaxation provided under the new norms, which allow the latter to pick up 36% stake in Bharti without breaching the 74% FDI cap in the telecom sector.