3 cheers to the Bharti guys for holding onto their vision! Bharti Airtel, India's largest private telecom company pulled out of take-over talks with MTN after South Africa's MTN proposed to change the controlling relationship. Earlier Airtel wanted to buy a 51% stake in MTN but later MTN proposed a new structure where the Aritel would become a unit of MTN. This went against Bharti's vision:
"of transforming itself from a home-grown Indian company to a true Indian multinational telecom giant, symbolising the pride of India, would have been severely compromised this was completely unacceptable to Bharti"
Airtel-MTN combined would have been the 6th largest telecom group in the world. However, Airtel's competitor Reliance Communications is now in merger talks with MTN.
Here is the official statement from Bharti Airtel:
At the invitation of MTN board, Bharti entered into exploratory discussions on the possibility of combining the two 'emerging market' telecom giants. A number of structures were discussed and evaluated between the lead bankers on both sides. An in-principle agreement was reached on 16th May and a term sheet was initialled between the two lead bankers. This agreed term sheet was presented to the MTN Board on Wednesday, the 21st of May.
MTN has now presented a completely different structure, from what was agreed. This new structure 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. Bharti believes that this convoluted way of getting an indirect control of the combined entity would have compromised the minority shareholders of Bharti Airtel and also would not capture the synergies of a combined entity. Further and more importantly, Bharti's vision of transforming itself from a home grown Indian company to a true Indian multinational telecom giant,symbolising the pride of India, would have been severely compromised and this was completely unacceptable to Bharti. Discussions were on till late last night without a breakthrough. Accordingly, Bharti has decided to disengage from the ongoing talks and has conveyed the same to MTN.
