MTN mum on Bharti deal progress

By Nicola Mawson, Contributing journalist

Johannesburg, 21 Jul 2009

Africa's largest cellular company, MTN, will not confirm whether it is seeking finance to the tune of $3.5 billion to secure a stake in India's Bharti Airtel.

MTN and Bharti said on 25 May that they were in “exclusive” talks around a merger, which is expected to be worth $23 billion. If the deal goes ahead, the combined entity would have a subscriber base of more than 200 million.

Exclusive talks are set to continue until month-end, at which point the companies are expected to issue a statement. Should the deal proceed, MTN and its shareholders would end up with a 36% stake in Bharti, of which MTN would own 25%. Bharti would acquire 49% in MTN.

Reuters reports MTN is in talks with a group of lenders to secure a $3.5 billion loan to back its proposed merger with Bharti. The wire service quotes “banking sources close to the deal”. Other sources indicate the Indian operator is talking to banks about a loan of between $5 billion and $6.5 billion to back the merger, the wire service adds.

This Reuters report has been backed up by the Wall Street Journal, which cites sources that say MTN is talking to banks in London for a loan of around $3 billion to finance the merger, while Bharti is in conversation with banks in Asia to finance its portion of the cost.

Nothing new

However, MTN will not confirm, or deny, the reports, saying: “At this stage, MTN has nothing further to add to the further cautionary announcement, which was issued to the market. The discussions are still in progress.”

MTN recently reiterated it was in talks with Bharti in a cautionary notice, which was issued earlier this month.

MTN's two largest shareholders are in favour of the deal. The Public Investment Corporation, with a 13.5% stake in the cellular company, and the second largest shareholder, the M1 Group, with 10.2% stake, are keen on the merger.

Irnest Kaplan, MD of Kaplan Equity Analysts, says nothing should be read into the fact that both parties are reportedly in talks with banks. He says MTN and Bharti are “just doing their homework”.

It is usual that companies put financing options in place before announcing a deal, should it go ahead, Kaplan says.