Government did have concerns about the structure of the MTN-Bharti deal and how it would shape the management of the merged entity.
Speaking to ITWeb yesterday, communications minister Siphiwe Nyanda said the primary issue was that MTN remain managed and controlled by South African hands. However, he said the deal would have been a coup for the country and MTN.
The negotiations between MTN and Bharti, which began in May, fell through late Wednesday afternoon, with Bharti lambasting the South African government for interfering in the deal.
“The structure needed an approval from the government of SA, which has expressed its inability to accept it in the current form. In view of this, both companies have taken the decision to disengage from discussions,” Bharti said in a statement.
However, the minister said the structure of the deal had little to do with government and everything to do with the approval of shareholders. “Government has no business interfering in arrangements between private entities.”
The MTN and Bharti deal could have resulted in the world's third-largest mobile operator, with more than 200 million subscribers. The first proposed structure - which is likely to have morphed somewhat since discussions began - would have given Bharti a 49% stake in MTN. In turn, MTN's shareholders would have taken up a 36% stake in Bharti, of which MTN would own 25%.
Nyanda said that, if the deal had been in the interest of shareholders, government would have supported it. “It also needs to be in the interest of the country.”
He added that a deal between MTN and Bharti could not have been bad for the country, since it would have been beneficial to the fiscus. “Especially in these times [current economic crisis] when we need capital inflows,” he said.
Meanwhile, analysts say SA's government is not solely to blame. Chris Gilmour, an analyst with Absa Investments, says: “The Indians are, to my mind, as much to blame.”
However, he adds that the end of exclusive talks does not mean Bharti and MTN may not have a third attempt at a merger or takeover. “I think MTN management is keen to sell. MTN has never been afraid to face a deal a second or even a third time.”
The minister says government will encourage renewed talks if MTN and Bharti decide to come back to the negotiating table. However, he adds that the initial management and structural concerns will still be valid.
Aside from a brief announcement on the JSE, MTN has been mum on the situation.
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