The coming together of Bharti and MTN will the change the global pecking order for telecom firms, pitchforking Sunil Mittal?s company to the fourth position from the current tenth. Bharti would expect the change would create value on its balancesheet, to compensate for the cost of the bid. The price tag, going by what has appeared in media reports, is $19 billion. This is $7 billion more than the so-far-costliest Tata-Corus deal. But whereas the steel deal pushed up Tata by over 200 ranks, the current one is a consolidation among the big global players. Naturally Chinese companies dominate the list, but this deal will change the order. But how would Bharti finance the deal? If it is not a leveraged buyout, the company?s plans will most certainly have to spin around a combined use of its equity and cash reserves to generate the flow. A Financial Times report said Bharti has a $12 billion financing support from merchant bankers. In that case, the company expects the deal to be sewn up quickly. The options include setting up a special purpose vehicle to ramp up the additional finance. It is these possibilities that made the market react adversely to the news. But that is a consideration based on cash flows and the consequent impact on the next quarter.
For the company, the stakes are much more long-run. Over the next few years, the size and synergy will create a different equation altogether. The deal, despite the consistent denials by Bharti of anything more than talks, will give the company leverage to access the MTN operations in 21 countries that in turn will ramp up its global presence. Though the two companies have comparable subscriber numbers, it is this difference that makes MTN such an attractive deal for Bharti. Also among the top ten mobile companies of the world, Vodafone too has a substantial Indian presence and there could be more changes that would impact India and the global ranking.
Will the presence of two multinationals in the domestic telecom space alter the nature of regulations here? One would not think so. The key to successful regulations is the use of transparent and consistent policy signals irrespective of the players. The Indian telecom sector has grown to this position because of them. One can be sure that continuation of these policies will see the emergence of many more.