In an obvious reference that Pretoria wants New Delhi to allow dual listing, South African President Jacob Zuma on Thursday said a Bharti-MTN deal is being held up by legal problems in India. ?I am told there are hitches in terms of the law, particularly on the Indian side, because you are talking about companies that must come together,? Zuma told reporters in Cape Town.
Zuma?s statement gains significance because the finance ministry has categorically ruled out the possibility of hurriedly allowing dual listing just to facilitate one corporate deal, as it requires full capital account convertibility and changes to the Foreign Exchange Management Act. Dual listing entails shares of both companies being listed on the stock exchanges of their respective countries, but is not permitted in India.
Earlier this week, it was revealed that the South African government had sought a dual listing provision by Indian authorities so that the independent identity of MTN could be maintained after a deal is signed with Bharti. This is seen as insurance in the event Bharti at some time in the future sought to buy out the South African telecom major.
Reacting to the South African government?s request, finance minister Pranab Mukherjee had said on September 15 that the issue of dual listing is being looked into, but no formal assurance has been given to the South African side.
Zuma said he was not taking part in the process, but added that support for the transaction could come once all the facts are known. ?I think the support will come once one has all the facts and you know exactly what is happening, whether that takes the South African economy and the companies further,? he said.
A Bharti spokesperson said the company had no further comment beyond what it had said in earlier statements. MTN was not immediately available for comment.
One analyst said MTN and Bharti are nevertheless likely to overcome any legal issues. ?India has stated it has no issues with the deal, but the only problem is with the dual listing. Both countries want ownership of their telecom assets to remain in their own countries,? said Sonam Udasi, vice-president of research at Brics Securities in Mumbai. ?But both the companies would know about these legal issues, and so are likely to work through them,? he said.
Knowledgeable sources told FE that the South African government fears that in the absence of dual listing, MTN might eventually be merged with Bharti, thereby losing its independent identity and brand. This is a politically sensitive issue, since Vodafone of the UK has already acquired another major South African telecom company, Vodacom. This leaves the country with only MTN as a major national telecom firm still owned by South Africans. MTN was also South Africa?s first black-owned group after the end of apartheid in the early nineties.
The Bharti-MTN transaction, which would create the world?s third-largest mobile firm by subscribers, is subject to an end-September deadline. The two companies have extended talks twice before, and a person with direct knowledge of the matter said on Monday it was possible the talks could be further extended by a few days.
South Africa?s communications regulator Icasa said earlier this week it might not grant approval to the proposed tie-up between MTN and Bharti Airtel this year. Bharti and MTN were involved in similar talks last year, but failed to reach an agreement.