The $23-billion deal for the merger of Bharti Airtel and South African giant MTN, which would have been the world's largest in the telecom sector, today fell through.
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.
The issue of dual listing of MTN to maintain its identity in the merged company appears to have been the deal-breaker during the tough negotiations lasting well over four months.
Prime Minister Manmohan Singh had strongly backed the deal which he took up with South African President Jacob Zuma at the G-20 Summit in Pittsburgh last week.
While announcing the calling off of the talks, Bharti in a statement expressed the hope that the South African government "will review its position in the future and allow both companies an opportunity to re-engage".
This is the second time in just over a year when Bharti has been forced to abandon talks for amalgamation of the two organisations in a complex deal that also hinged on Indian government's clearance for dual listing.
"This transaction would have been the single largest FDI into South Africa and one of the largest outbound FDIs from India," Bharti statement said, adding "the structure needed an approval from the government of South Africa, which has expressed its inability to accept it in the current form".
Senior management of Bharti, including Sunil Mittal, could not be reached immediately for comments as they are on a annual off-site, most likely in Pataya, Thailand.
After Bharti had called off negotiations with MTN last year accusing the South African entity of reneging on its commitment and presenting a different structure, Anil Ambani-led RCom had entered into negotiations with MTN for a deal.
This was also called off after Anil's elder brother Mukesh Ambani asserted the first right of refusal and
threatened a legal action. As per the proposed structure, Bharti would have acquired 49 per cent shareholding in MTN and in turn MTN and its shareholders would acquire about 36 per cent economic interest in Bharti.
The South African government had demanded dual listing of MTN in order to protect the character of MTN as a South African entity.
While starting the negotiations for the second time in May this year, Sunil Mittal had said "we see real power in the combination and we will work hard to unleash it for all our shareholders."
India Inc feels let down by deal failure
Corporate India today felt let down by the failure of the $23-billion proposed merger deal between telecom giants Bharti Airtel and South Africa's MTN but said the south-south co-operation was still alive.
"In this particular proposed deal they (South African government) could have said they will make an exception in their law in terms of dual listing norms," Ficci secretary general Amit Mitra said.
He, however, said there was still scope in South Africa where Indian companies are preferred by "black administration" which today controls the country.
Assocham President Sajjan Jindal described the development as "the most unfortunate". He said the merger between Bharti and MTN would have provided a "golden opportunity" for India Inc to spread its wings in the global business space.
"It is most unfortunate. The MTN deal has been called off despite full support from the Indian government. It was a golden opportunity for India to globalise its wings," he said.
In a consolatory tone, CII director general Chandrajit Banerjee said the MTN deal not going through should not be seen as a dampener.
"India Inc has had many success in the past and in future too we can hope to see some large merger and acquisitions by Indian companies, including the likes of Bharti," he added.
PHDCCI president Satish Bagrodia, however, said: "Indian industry is quite disappointed with the proposed deal being called off. In future Indian companies will be over cautious."
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