


BHARTI AIRTEL AND MTN

THE DEAL IS DEAD
 LONG LIVE THE DREAM


Presented by:
 Neha
Aggarwal (136)
 Asha
Jaikishen (126)
 S. Pramoth
(148)

11/29/09 Finance F1
Archit 1
Bharti Airtel
 Telecom giant Bharti Airtel is the
flagship company of Bharti Enterprises .
 Started its operations in 1995 .
 Operates in 23 telecom circles
 Presently the No . 1 operator in India .
 In 2009 Airtel was also launched in Sri
Lanka .
 Three individual strategic business units 
   Mobile Services
 Airtel Telemedia Services
 Enterprise Services


11/29/09 Finance F1 2
An Overview

BHARTI MTN

REVENUE 7.7 12.3

( FY 2009)
(USD bn)

CUSTOMER BASE 108 (Aug 2009) 100 ( May 2009)

(in mn)

11/29/09 Finance F1 3
About MTN
 It is a global communication partner and
world class cellular network .

 Launched in 1994 , it Operates in 21
countries in Africa and the middle east .

 The MTN Group is listed in South Africa on
the Johannesburg Stock Exchange under
the Telecommunications Service Sector .


1 1 /2 9 /0 9 Finance F1 4
Time Line for BHARTI - MTN
deal

 May 5 , 2008: MTN acknowledged deal talks with Bharti

Airtel.
 May 24 , 2008: Talks between Bharti and MTN were called off.
 May 26 , 2008: Reliance Communications , India's No 2 mobile
operator, started 45-day exclusive talks with MTN led by
Anil Ambani, but the talks fell through.
 July 18 , 2008: Reliance and MTN call off talks.
 May 25 , 2009: Bharti and MTN announced a revival of merger
talks.
 May 27 , 2009: Four of MTN's top 25 shareholders rejected a
tie-up with India's Bharti based on terms unveiled.
 May 29 , 2009: But MTN's No 2 shareholder , Lebanon's Mikati
family, came out in support of the merger talks.


11/29/09 Finance F1 5
Cont ….

 June 2 , 2009: MTN's biggest shareholder , state pension fund

Public Investment Corporation supported the merger as
well
 July 7 , 2009: MTN and its shareholders can buy 36 per cent
in Bharti Airtel via GDRs
 July 30 , 2009: An Indian government minister says talks
between Bharti and MTN, which could eventually lead to a
full merger of the two firms, have not been finalised yet.
 July 31 , 2009 : Standard Chartered is advising Bharti in the
merger talks with MTN.
 Aug 7 , 2009: India's finance minister says Bharti has
approached the country's largest lender, State Bank of
India, for loans of $1 billion and 50 billion rupees
($1.05 billion).


11/29/09 Finance F1 6
Cont ….

 Aug 18 , 2009: Bharti has received bids from more than a

dozen foreign banks, including Citi and JPMorgan, to fund
its proposed stake buy in MTN, the Economic Times reports,
raising hopes for a deal.
 Sept 22 , 2009: Sebi revises takeover code, which mandated
GDRs with voting rights, would trigger a open offer if
the holding crossed 15 per cent. 
 Sept 24 , 2009: South African officials and MTN officials
meet SEBI and RBI to discuss dual listing.
 Sept 30 , 2009:Sunil Mittal-led Bharti called off
discussions with MTN citing the South African
government's rejection of the proposed merger structure,
which would have created the world's third largest
telecom company with combined revenues of over $20
billion annually and a subscriber base of over 200
million.


11/29/09 Finance F1 7
Key Highlights Of The
Deal
 Bharti will acquire a 49% shareholding in MTN, which
 along with its shareholders, will acquire an
economic
 interest of approximately 36% in Bharti, out of
which
 25% will be held by MTN and the remainder
 by its shareholders.


 As per the proposed scheme of arrangement, MTN will

acquire a 25% in Bharti for an effective
consideration of about $2.9 bn in cash and newly-
issued shares of MTN, close to 25% of the currently
issued share capital of the South African firm.

 Bharti will have substantial participatory and
11/29/09 governance rights
Finance F1 in MTN, thus enabling it to fully 8
Key Highlights Of The
Deal
 MTN's economic interest in Bharti will be equity
 accounted and the company will enjoy
appropriate representation on its board.


 Bharti will act as the primary vehicle for both

Bharti and MTN for pursuing further expansion
in India and Asia, while MTN will be the primary
vehicle for both Bharti and MTN for further
expansion in Africa and the Middle East.

 The combined entity will have a customer base of
over 200 mn subscribers and combined revenues
of over $20 bn.


11/11/11 Finance F1 1
Key Highlights Of The
Deal
 Bharti will acquire approximately 36% of the
currently
 issued share capital of MTN from its
shareholders for a consideration of ZAR 86.00 in
cash and 0.5 newly issued shares of Bharti in the
form of Global Depository Receipts (GDRs) for every
acquired share of MTN which, in a combination with
MTN’s shares issued in part settlement of its
acquisition of a post transaction economic
interest of approximately 25% in Bharti, will take
the company’s stake to 49% of MTN’s enlarged
capital.


11/29/09 Finance F1 10
11/29/09 Finance F1 11
Bharti offers last mile
sops to
wrap MTN deal on 22 nd
Sept , 09
 Bharti Airtel has offered to retain the top
management of MTN for at least three years
 In the revised tie-up plan, MTN was to get a 27-%
stake in Bharti instead of the 25 % earlier
proposed
 MTN's minority shareholders were given the option to
take $13 billion in cash instead of $7 billion
cash and $6 billion worth of stock.


11/29/09 Finance F1 12
BENEFITS OF THE DEAL
 The deal will make the Bharti-MTN combined
 entity the world’s third largest mobile
operator.

 MTN will expand Bharti’s presence in an additional
21 countries. In terms of global presence,
Bharti currently has a presence only in Sri
Lanka, Seychelles and Channel Island.


 Access to the market with higher ARPU as compared

to India.

11/29/09 Finance F1 13
Backlogs of the deal

 MTN already has 100 mn subscribers and its

geographies with a high GDP/per capita are
already saturated. Bharti will, thus, find it a
tough task to increase the number of
subscribers in geographies with a low
population and GDP/per capita.
 Since MTN operates across 21 geographies, there
could also be integration issues and delay in
unlocking of synergies between the two
entities.
 The deal will also result in a significant earnings
dilution for Bharti over the short term, which
could have a significant negative impact on its
stock price.
 It can create
11/29/09
a debt pile of $ 4 billion on the 14
Finance F1
Importance of the deal
for Telecom industry..
 There is not much juice left in the Indian telecom
market.
 Indian Telecom Market will reach stagnation by
the end of 2010, while African market is
estimated to grow at 40 %.
 On the ARPU front, Africa ranks better than India.
 As compared to India, in Africa, per-minute prices
are higher, demand for SMS over voice is
limited because of low literacy levels.
 It would yield cost savings, allow for technology
sharing, and provide financial muscle for more
expansion.


11/29/09 Finance F1 15
Why the deal was
called off?
 On 30TH Sept, 2009 Sunil Mittal-led Bharti called
off discussions with MTN citing the South
Africa
government's rejection of the proposed
merger structure .


 The SA Govt was insisting Indian Govt to change

laws to accommodate Dual Listing Company
(DLC) structure.

 India rejected because it would have meant
allowing capital account convertibility and
amending the Companies Act & listing agreement
to facilitate a single deal.


11/29/09 Finance F1 16
Dual Listing
A process by which a company would be allowed to be

 listed and traded on the stock exchanges of two
 countries.
 The dual listing system would allow the companies to
retain their separate legal identities
 Done to protect the national identities of the two
companies.
 From the shareholders' perspective they can buy and
sell shares of both the companies on the stock
exchanges in the two countries.



11/29/09 Finance F1 17
 Reasons for non acceptability of
Dual listing by India .
 The existing FDI policy framework would have been rendered
unprofitable.
 (as Indian authorities would not have been able to monitor
sectoral
 caps on direct and indirect investment that are imposed on 13
industry
 sectors, including telecom.)
 Ineligible entities for investing in Indian companies could have
acquired a stake through transactions carried out on the overseas
exchange, in violation of the Foreign Exchange Management Act
(FEMA)
 Weakening of the SEBI’s oversight of the stock market, led to trading
activity being taken away from stock exchanges in India and a
likely revenue loss for the Indian exchequer.
 Another important bottleneck that the government of India should
consider is removing the cap on capital account convertibility.
11/29/09 Finance F1 18

After ca lling off the
deal ….
 Bharti Airtel Ltd’s shares had risen 4 % to Rs435 but
that relief
 rally was short-lived, with its shares falling by 8 %
to Rs400
 on Monday(5th oct.)
 The resources are free for Bharti to explore 3G related
opportunuties in India and expand its operation in Sri
Lanka.
 Chairman Sunil Mittal stated that he would continue to
search globe for acquisitions.
 Bharti is valued higher compared to the other two peers
(reliance communications and idea cellular ) in terms of
EBITDA and therefore , Bharti appears to be better placed
to take advantage of new opportunities in the Indian
11/29/09 Finance F1 19
LOSS TO THE BANKS
INVOLVED
 Banks are stated to lose potential fee of over $200
million
 due to the failure of the Bharti-MTN transaction.
 Advisors and bankers to Bharti would lose about $120
million while MTN’s bankers and advisors are believed to
have lost $80 million.
 Standard Chartered was the lead advisor to Bharti while
Barclays was the joint M&A advisor.
  Bank of America , Merrill Lynch and Deutsche Bank
were advising MTN.

11/29/09 Finance F1 20
 THANK YOU !!...

11/29/09 Finance F1 21