Let me start of by giving a brief introduction on the background of the two companies involved, that is Bharti Airtel & South Africa’s MTN, about whom we will be talking at length later on in the discussion.
Bharti Airtel: Bharti Airtel is the flagship company of Bharti enterprises. It is India’s largest and first private telecom service provider with a footprint in all three 23 telecom circles. Bharti Airtel since its inception has been at the forefront of technology and has steered the course of the telecom sector in the country with its world class products and services. The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU’s) - Mobile Services, Airtel Telemedia Services & Enterprise Services. The mobile business provides mobile & fixed wireless services using GSM technology across 23 telecom circles while the Airtel Telemedia Services business offers broadband & telephone services in 95 cities and has recently launched India's best Direct-to-Home (DTH) service, Airtel digital TV. The Enterprise services provide end-to-end telecom solutions to corporate customers and national & international long distance services to carriers. All these services are provided under the Airtel brand. MTN Group Limited: MTN Group Ltd, together with its subsidiaries, provides communication services. The company principally offers cellular network access and business solutions. It also offers convenience services, including ATM TopUp, voicemail, voicemail lite, WASP, and wakeup call; messaging services comprising SMS, MMS, Email2SMS, and SMS2Email; mobile banking services; and broadband services. MTN Group serves approximately 40 million subscribers in 21 countries, principally Botswana, Cameroon, Cote d’Ivoire, Nigeria, the Republic of Congo, Rwanda, South Africa, Swaziland, Uganda, Zambia, Iran, Afghanistan, Benin, Cyprus, Ghana, Guinea Bissau, the Guinea Republic, Liberia, Sudan, Syria, and Yemen.
THE DEAL STRUCTURE:
A year after Bharti Airtel & South Africa’s MTN called of talks on a possible merger, both companies came out with fresh announcements regarding talks on revival of the possible merger in order to create a global telecom giant and benefit from a mutual geographical expansion, traversing the African continent, west Asia and the Indian continent. If the deal comes through it will propel the combine into the league of top 5 telecom operators globally. The deal structure involves a stock cum cash deal worth over $23 billion, which means that both companies will have to pay cash and equity for stakes in each others companies. Currently it has been proposed that Bharti Airtel will acquire a 49% stake in MTN and MTN LTD will be receiving a 36% economic interest in Bharti Airtel, and this is said to be an event that can in future, lead to a full fledged merger. The deal values MTN at 157 Rands per share which is considerably lower than that of 185 Rands per share that was offered by Bharti during merger talks with MTN last year. Bharti will be offering GDR’s(global depository receipts) and cash in return for MTN shares. However it is very well known that large shareholders in MTN need to sell their stakes to Bharti if the deal has to come through. For e.g. Lebanon based Mikati family owns 10% stake & PIC which is a south African pension fund owns a further 13.5%. To put it in simple words:
|A) Bharti-MTN shareholder transaction |B) Bharti-MTN transaction | |1) Bharti Airtel will buy 36% stake in MTN from shareholders |1) MTN gets 25% economic interest in Bharti Airtel. This will be | | |done by Bharti issuing shares to MTN and affiliate companies | | |a) MTN will pay cash of $2.9 billion to Bharti for...