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INSTANT VIEW – Bharti, MTN Call Off Talks

30 September, 2009

Bharti Airtel said late on Wednesday it and South Africa’s MTN had called off talks for a planned tie-up due to the inability of the South African government to accept the deal in current form.

COMMENTARY

DEVEN CHOKSEY, CHIEF EXECUTIVE OF K.R. CHOKSEY SHARES AND SECURITIES, MUMBAI

“Bharti wanted to expand their footprint globally, but that just doesn’t seem to be happening right now. But this is not the end of the story. They probably have to look at something smaller than MTN or some other region to enter.”

“The deal being called off is a blessing in disguise for Bharti shareholders as the company would have had to borrow a lot, and Bharti’s earnings per share would have been diluted by 5 to 8 percent.”

AMIT MITRA, SECRETARY GENERAL, FEDERATION OF INDIAN CHAMBERS OF COMMERCE AND INDUSTRY TO CNBC TV18:

“Let’s not be depressed, the South African economy is still very open. We need to go in there. I know that there are companies sitting in South Africa, selling their products, and as far as investing in a big way is concerned, we should not shy away. This was a special case where both socio-psychological and regulatory (issues) could not be sorted out. We cannot give up South Africa as a great partner in future.”

JIGAR SHAH, SENIOR VICE PRESIDENT, KIM ENG SECURITIES, MUMBAI:

“The stock has not risen since May due to the deal uncertainity. Now that it is over, the stock can rally as it won’t be a drag on the its finances. On a strategic front, it is mildly negative as this would have been a mega deal. But Bharti can pursue opportunities in other emerging geographies.”

AMBAREESH BALIGA, VICE PRESIDENT, KARVY STOCK BROKING, MUMBAI:

“We could possibly see the stock rising sharply tomorrow. It is positive for the stock as the uncertainity clears and the acquisition-related funding worries ease. If it had gone through then it would have been short-term positive for the stock but in the medium to long term a drag on the stock.”

HLELO GIYOSE, TELECOM ANALYST, STANLIB, SOUTH AFRICA:

“The deal was difficult in its current form. I’m not surprised it did not go through.”

SHUBHAM MAJUMDER, TELECOM ANALYST, MACQUARIE TO CNBC TV 18:

“I think MTN was clearly one of the most attractive assets that you had from Bharti’s perspective.”

“I think there are very few opportunities of the size, and more importantly scale of MTN globally at this point in time. I think it would be much smaller businesses and footprints that are up for grabs in the global emerging markets telecoms space from here on for Bharti.”

SANJAY CHAWLA, ANALYST AT ANAND RATHI SECURITIES TO ET NOW TV CHANNEL:

“Bharti has been looking to expand internationally for some time now.

“One should consider a possibility that if the South African government is willing in future, there may be competitors for Bharti. The competitive landscape will be much wider in future.”

V.K. SHARMA, HEAD OF RESEARCH, ANAGRAM STOCK BROKING, AHMEDABAD:

“Bharti’s stock will move up. The market does not like acquisitions… so the market would react with some kind of solace.”

ALEX MATHEWS, HEAD OF RESEARCH AT GEOJIT-BNP PARIBAS FINANCIAL SERVICES, MUMBAI:

“This will turn out to have a positive effect on Bharti’s stock in the short term. The alliance would have had hit Bharti’s balance sheet.”

“And investors were waiting for so long on some clarity about the deal. At least now the uncertainty is over.”

MARKET REACTION

MTN shares fell as much as 3.49 percent to 119 rand after news

South Africa’s rand fell as much as 2.56 percent to 7.62 against the dollar after the news, according to Reuters data. extended losses against the dollar to 7.58.

Ahead of the news, shares in Bharti closed 0.1 percent lower in a market that rose 1.6 percent.

BACKGROUND

Bharti and MTN revived merger talks in May, a year after previous talks broke down over who would control a merged entity.

A merger would have created an emerging markets giant with more than 200 million customers across India, Africa and the Middle East. A combined firm would have been the world’s third largest by subscribers.

The talks had been extended twice and the present deadline was until Wednesday.

The deal faced scrutiny from regulators and politicians. South Africa was eager to retain MTN’s national character and had approached Indian authorities to consider a dual-listed entity, a structure Indian laws currently do not allow.


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INSTANT VIEW – Bharti, MTN Call Off Talks

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