Currently, MTN has a market value of around $24.3 billion and assets close to $18.33 billion while Bharti has a market value of $30.59 billion and assets close to $ 2.28 billion. According to Forbes, MTN sales stand at $11.09 billion and profits at $1.06 billion and Bharti has sales of around $6.73 and profits of around $1.59 billion. Investment bankers expect the deal to significantly push up market cap of both companies. Bhartis steps to acquire 49% stake in MTN, say investment bankers is probably at the right time, unlike some of the similar large deals like Tata Steel-Corus and Tata Motors-Jaguar Land Rover which took place when markets were at the peak and are now bleeding to pay back. Says Indranil Deb, principal, Mobius Strip Capital Advisors, Besides raising about Rs 19,000 crore for the MTN deal, Bharti would also require to raise another Rs 14,000 crore for 3G licence and rollout. It wouldnt be a difficult task for Mittal who has grown with private equity funds over the last 10 to 15 years and yet retains a 28.04% share in the company".
According to Deb, Mittals current financial position would enable him to garner support from both global equity players and investment bankers. At the same time, the Mittals shareholding of 28.04% in Bharti Telecom is expected to reduce to 17.82% post the deal.
While MTN would get access to funds, Bharti would be able to reach out to 20 countries where MTN is present. However, it will have to go through various regulatory processes, which might create hurdles in the short term. A Credit Suisse report sites the Vodacom case as an example, where the South African telecom regulators (ICASA) bowing to labour union pressures retracted on its approval for Vodacoms listing and stake sale by Telkom (not listed) to Vodafone. The concerns cited by the unions were the impact on jobs if control of the company passes to a foreign company. However, the investment-banking community feel that Bharti would be better placed to overcome such issues considering their experience with the Indian regulatory bodies.