It now emerges that Bharti Airtel proposes to acquire the South African telecom major MTN in a two-stage process. In the first stage, the company would acquire a 51% controlling stake and would only later look at the possibilities of a complete merger.
According to sources in the know, the two-stage approach was finalised at a meeting between both sides in London on Thursday. As reported earlier by FE, the meeting was attended by Bharti CMD Sunil Mittal and group CFO Akhil Gutpa, while MTN was represented by global president & CEO Phuthuma Nhleko and CFO Rob Nisbet.
Industry sources said it was decided at the meeting that an outright merger would be both complex and costly, as Bharti would have to fork out $45 billion. In contrast, if the company were to first acquire 51% stake, put in place an integrated management structure and then leverage MTN?s revenue, it would be easier to later merge both entities.
The other advantage of initially opting for a majority stake is that cultural differences and the geographical dispersion of MTN?s operations–across 21 countries in Africa and the Middle East?would be better managed. Risk would also be minimised, said industry analysts.
When contacted, a Bharti spokesperson said, ?We have already issued a statement and have nothing further to add.?
The advantages of acquiring only a 51% stake to Bharti would be immense in revenue terms, as it would capture the international long-distance market of 23 countries. The resulting traffic on its long-distance network would be reflected on its balance sheet.
Experts point out that the two-stage approach is akin to the Tata-Corus deal wherein, despite acquiring Corus, Tata has still not merged the two companies. Meanwhile, the two sides have also frozen the post-deal management structure, with MTN chairman Cyril Ramphosa continuing in his post while Mittal would take over as group CEO. Nhleko would be deputy CEO and head of global operations.
