Mumbai, August 20: Bharti Airtel and South Africa’s MTN Group extended until Sept. 30 their exclusive talks aimed at merging their operations to create the world’s third-largest mobile operator.
It was the second extension to the talks, which were first announced in late May. The companies had earlier extended the exclusive talks by a month to Aug. 31.
The companies said in separate but similar statements that discussions continued to progress satisfactorily, though no decision had yet been taken to acquire any shares or implement the potential transaction.
“It simply means the uncertainty continues,” said Sanjay Chawla, telecoms analyst at Mumbai brokerage Anand Rathi.
“There could be issues on pricing, management representation or Bharti GDRs not wanted by MTN shareholders,” he said.
Shares in Bharti, valued at about $32 billion, unwound early gains to be down 0.6 percent at 0738 GMT in a Mumbai market up 1.8 percent.
“The stock is not going to outperform till this is sorted out,” Chawla said.
Bharti and MTN had revived merger talks in May, a year after previous talks broke down over who would control a merged entity. A merger would create an emerging markets giant with more than 200 million customers across India, Africa and the Middle East.
The exclusive talks over the deal, which would see each firm pay cash and stock for a stake in the other were initially due to end on July 31.
A combined entity would be the third-biggest mobile operator based on subscribers, behind China Mobile and Vodafone, although its annual sales of $20 billion would be dwarfed by China Mobile’s $60 billion and Vodafone’s $65 billion.
Under the initial terms, MTN and its shareholders would take a 36 percent economic interest in Bharti and the Indian firm would end up with 49 percent of MTN.
PUZZLING
Shares in MTN, which has a market value of $29 billion, were down 0.7 percent in Johannesburg, lagging a 1.3 percent rise in the JSE Top-40 index.
“I find it puzzling. They have been in discussions for quite a while now. It’s not great to keep the stock in limbo like this,” said Mark Ansley, a telecoms analyst at Cape Town-based Cadiz African Harvest, which owns MTN shares.
“We have seen it in the past that ratings turn to drift while stocks are kept in limbo in terms of corporate action. It’s certainly not good news. Our view is that we will like to see some advancement in the negotiations,” Ansley said.
Some MTN shareholders, including the South Africa’s Public Investment Corporation (PIC), have indicated they might hold out for a higher price, as they felt Bharti needed to pay a bigger premium for effective control of MTN.
Both Bharti and MTN had said the structure and terms of the potential transaction may be adjusted.
Separately, a source familiar with the negotiations had told Reuters that Bharti might increase its offer by between 5 and 10 percent.
The deal would give both firms exposure to new markets ripe for growth, while a full merger, the eventual aim of the talks, would yield cost savings, allow for technology sharing, and provide financial muscle for more expansion, analysts said.
Standard Chartered was advising Bharti Airtel, while Bank of America Merrill Lynch and Deutsche Bank were advising MTN.
—Agencies