Indian mobile operator Bharti Airtel's move to sweeten a $24 billion deal with South Africa's MTN is a key step in reaching an agreement as a deadline nears, analysts and sources said on Friday.
Bharti has increased the cash component of its offer for a 49 percent stake in MTN to $10 billion from a proposed $7.6 billion, two people familiar with the matter said.
On top of that, Bharti would pay $4 billion in stock for a total package of $14 billion, 7 percent more than the earlier $13 billion proposed deal.
"We believe a deal under the aforementioned terms would be positive for Bharti given only a marginal increase in overall payout," RBS analysts wrote in a research note.
The deal is subject to an end-September deadline. The firms have extended talks twice.
"Management of both companies has been working hard and I'm optimistic we'll get an agreed offer to put to shareholders before the end of the month," according to one source, who could not be named as he was not authorized to speak publicly about the negotiations.
"I don't believe Bharti will have to sweeten its offer any further."
Reuters reported last month that Bharti might sweeten its offer for the MTN stake by 5-10 percent, quoting a source familiar with the negotiations.
Regulatory issues were the last hurdle to be crossed ahead of an announcement, one of the sources said, adding he did not see any major obstacles.
Banking sources told Reuters that Bharti's advisers, Standard Chartered and Barclays have yet to approach syndicate bankers for an increase in the loan size from an initial estimate of over $4 billion.
"The loan size is still the same, $4-$5 billion," one of the syndicate bankers told Reuters.
Analysts said the key factor in the success of the deal would be the response of MTN shareholders.
In a client note, HSBC said both companies' management were working to sort out regulatory issues before approaching MTN shareholders, 75 percent of whom have to approve the deal.
The note said the approval, in principle, from South Africa's Department of Communications and labor unions over the last month support its argument that the deal could go through.
"Given this, we believe there is a fair chance of Bharti and MTN reaching an agreement, but approval of 75 percent of MTN shareholders will be key," HSBC said.