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Bharti & MTN deal, reasons for call off

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Bc Presentation

  1. 1. Presented By Dhaval Ambani Business Communication
  2. 2. Bharti Airtel Details <ul><li>Airtel comes to you from Bharti Airtel Limited. </li></ul><ul><li>Bharti India’s largest telecom services provider with a revenue of about Rs 37,000 crore (Rs 370 billion), market capitalisation of over Rs 1.60 lakh crore (Rs 1.60 trillion), </li></ul><ul><li>3 Strategic Business Units (SBU’s) </li></ul><ul><li>Mobile Services, Airtel Telemedia Services & Enterprise Services. </li></ul><ul><li>The mobile business provides mobile & fixed wireless services using GSM technology across 23 telecom circles. </li></ul><ul><li>Airtel Telemedia Services business offers broadband & telephone services in 95 cities. Recently launched India's best Direct-to-Home (DTH) service, Airtel digital TV. </li></ul><ul><li>The Enterprise services provide end-to-end telecom solutions to corporate customers. </li></ul>
  3. 3. MTN Details <ul><li>Company Profile </li></ul><ul><li>Launched in 1994 The MTN Group Limited (MTN Group) </li></ul><ul><li>MTN is a global player operating in about two dozen countries. </li></ul><ul><li>Offering cellular network access and business solutions. </li></ul><ul><li>Listed in South Africa on the Johannesburg Securities Exchange (JSE) Telecommunications sector.   </li></ul><ul><li>Multinational telecommunications provider, with its core operations in 21 countries in Africa and the Middle East, 90,7 million recorded subscribers (December 2008) </li></ul>
  4. 4. CALL LOG 2008 May 6: Bharti Airtel begin talks with MTN to buy stake in the South African company May 25: Bharti and MTN call off talks May 27: Reliance Communications (RCom) and MTN sign a 45-day exclusivity agreement to negotiate a deal Jul 19: RCom and MTN call off talks 2009 May 25: Bharti-MTN announce talks for a $23-billion share-swap-and-cash deal. Deadline set for July 31 Aug 3: Bharti-MTN extend deadline from July 31 to August 31 Aug 20: Bharti-MTN extend deadline again to September 30 Sep 14: South African government says MTN’s ‘South African character’ must be maintained Sep 15: Indian government says open to dual listing in India Sep 24: Officials from the South African government meet Sebi, RBI and finance ministry mandarins
  5. 5. The Deal <ul><li>Bharti on offered 86 rand ($11.4 billion) in cash and 36 per cent stake in Bharti for each MTN share for a 49 percent stake. </li></ul>
  6. 6. Deal benefits to Bharti <ul><li>Increase in annual sales of $20 billion and 200 million wireless subscribers from Johannesburg to Mumbai. </li></ul><ul><li>Would become 49% stake holder of South Africa biggest wireless service provider </li></ul><ul><li>The combined operation would have helped Mittal’s Bharti increase overseas sales at a time when Reliance and Vodafone are narrowing its lead in India. </li></ul><ul><li>Competition is also intensifying with the entry of more foreign rivals including Japan’s NTT DoCoMo Inc. </li></ul>
  7. 7. Challenged by Indian Investors Protection Council (IIPC) <ul><li>Mittal Brothers alone will acquire 49 per cent of equity shares with voting rights in one shot,. </li></ul><ul><li>MTN and its shareholders will be issued 36 per cent of GDRs with voting rights only upon conversion into equity shares — 25 per cent in Bharti Airtel and 11 per cent shares from Bharti Telecom. </li></ul><ul><li>This makes merger only between promoters and not between the two listed company i.e. Bharti Airtel and MTN </li></ul>
  8. 8. The Hurdles <ul><li>South African considers MTN as a crown jewel </li></ul><ul><li>South Africa government holds 21 % stake through Public Investment Corporation </li></ul><ul><li>Wanted to maintain MTN’s “South African character” and was looking for a different structure for the deal. </li></ul>
  9. 9. No Dual Listing <ul><li>Dual listing structure would have rendered India’s foreign direct investment policy , led to huge tax losses to the government. </li></ul><ul><li>Weakened market regulator SEBI unable to monitor overseas stock exchanges – MTN listed Johannesburg Securities Exchange </li></ul>
  10. 10. Conclusion <ul><li>The deal fell because of South Africa's political compulsions & SEBI regulations </li></ul>