Bharti Calls off Talks with MTN

26 May, 2008:

India’s leading mobile phone service firm Bharti Airtel Ltd has dropped its meger talks with South African telecommunications major MTN Group Ltd. The Bharati group withdrew from the deal terming proposal by MTN was "unacceptable. If the deal become successful it would have created the world's sixth-largest wireless telecommunications concern, bringing together two major mobile players operating in emerging markets in different parts of the world. The combined market value of the merged entity would have been nearly $80 billion and more than 130 million customers across Asia, Africa and the Middle East.

"Bharti has decided to disengage from the ongoing talks and has conveyed the same to MTN," a statement from the company said. Te talks collapsed over a new ownership structure proposed by Johannesburg-based MTN that would have involved "Bharti Airtel becoming a subsidiary of MTN." Bharti's plan was to transform from a home grown Indian company to a true Indian multinational telecom giant, symbolising the pride of India. According to the press statement from the company, if agreed, new clause in the deal would have been severely compromised and this was completely unacceptable to Bharti," Analysts had valued MTN, whose shares had soared since the merger talks were confirmed in early May, at up to 50 billion dollars.

“MTN has now presented a completely different structure, from what was agreed. It envisages Bharti Airtel becoming a subsidiary of MTN and exchange of majority shares of Bharti Airtel held by the Bharti family and Singtel, in exchange for a controlling stake in MTN.” release from Bharati said.

Bharati was eyeing a 51 percent stake in MTN or would engineer a merger between the two firms in a deal that would value MTN at up to $50 billion. Bharti said after an in-principle agreement had been reached, MTN had presented a new structure that it saw as a "convoluted way of getting an indirect control of the combined entity" and could not accept it.