Bharti faces irritants in MTN deal

Whenever MTN has initiated a merger exercise, the talks failed to conclude — but its share price has gone up. It went up by 9 per

cent on Monday following the announcement of start of negotiations for the deal. Bharti’s share price fell by 5.4 per cent.

In May 2008, MTN’s share price went up by 10 per cent on an announcement of discussions with Bharti Airtel for merger. Bharti’s shares, however, fell by 5 per cent.

In October 2007, MTN share prices jumped on reports that it was in negotiations with China Mobile. The company later denied these reports as rumours.

In March 2008, MTN’s shares went up on reports that Vodafone was in talks with MTN. These were also denied by MTN. Similarly, its talks with Reliance Communic-ations also failed in July, 2008.

This time, the deal is very different as both the companies are buying stake in each other.

The unstable regulatory regime and strong labour unions would be other major challenges for Bharti Airtel.

“Political forces in South Africa have always looked at keeping their national assets under South African control,” said Subodh Aggarwal, chairman of Euromax, a London based investment bank, dealing in African M&As.

“A recent deal between Vodafone and Vodacom, another South African telecom operator, is facing difficulties for the same reason even after completion of the deal.”

Earlier this month, South Africa’s communication regulator, the Independent Communication Authority of South Africa (ICASA), took an about turn on UK-based Vodafone increasing its equity in Vodacom. After approving the deal, it changed its stand and expressed concerns over the legality of Vodacom’s operating licence if a foreign entity became the majority shareholder of the network provider.

Labour unions have also opposed the Vodafone-Vodacom deal. Reports suggest that labour unions are also opposed to Bharti-MTN deal.