The Deal

Bharti Airtel with 100million subscribers in India sub-continent market merger with South Africa’s MTN also with 100 million subscribers in Africa, if struck could have created a US$61 billion transnational telecom Goliath with combined revenue of US$20 billion and over 200 million subscribers across Africa, Asia and West Africa.

This is a bit complicated deal to understand. Lets try to guage what is the deal structure

Bharti would get 36% share in MTN from MTN shareholders by two means.

- It will pay for this in two parts- a cash portion of 86 Rand (US$10.34) per share totaling US$7.03 billion

- and half a freshly issues Bharti shares for every MTN share it gets (about 34 Crore shares worth roughly $6.2bn as at Friday’s 22nd May 2009 market share price)



While MTN would eventually get 25% share in Bharti post merger by paying in two parts:
- US$2.89bn in cash
- and fresh issue of MTN share to Bharti equivalent of 25% of MTN existing equity (worth US$7bn)
At the end of this deal, Bharti would hold 49% in MTN while MTN will hold roughly 36.4% of
Bharti. Post merger the share holding in Bharti would look somthinlike this
(Source: Business India)
















Bharti would issue in this case GDR which would be listed in Johannesberg Stock exchange. The deal had a complication that South African government had called for a dual listing of the merged entity. What this would mean is that the entity will be listed in Primary Market in India and South Africa and the shareholders of the company will be able to trade in both the markets. This would not only require current account convertability but also capital account convertability to make this happen.

For that to take place, significant changes will have to be made in Indian law and in the Foreign Exchange Management Act, and Reserve Bank of India approval will have to be sought.

All figures are from Business India