South Africa's Treasury said MTN has submitted an exchange control application for a proposed tie-up with Bharti Airtel, in the clearest indication yet that their deal is proceeding despite some shareholder opposition.
South African telecom operator MTN and Bharti have been in negotiations since May 25 on a $23 billion cash and share-swap deal aimed at an eventual full merger. The deadline for the talks has been extended twice, most recently the deadline was put back another month to Sept. 30
"The National Treasury has received an application via the South African Reserve Bank that relates to various exchange control regulations," Treasury spokeswoman Thoraya Pandy said on Wednesday.
"We are still processing the application and therefore cannot provide any further comment on the application."
The application suggests the talks on the deal are gaining momentum and that the parties are closer to agreement on what funds may exchange hands.
"It certainly seems they are making progress on the deal," Jan Meintjes, a telecoms analyst at Gryphon Asset Management said, adding that he would not comment further until he saw more details.
The South African Treasury and central bank have to consider whether the flow of money resulting from a tie-up would infringe upon exchange control laws and if any legal exemptions are necessary.
A source familiar with the transaction said that both parties were seeking regulatory approval.
"This is something not new. Representations have been made since the deal was mooted. It's clear that they want to ensure that before they make an announcement that they tick all the necessary boxes," the source said.
A combined Bharti-MTN would be the world's third-biggest mobile operator by subscribers after China Mobile and Vodafone. But its annual sales of $20 billion would be dwarfed by China Mobile's $60 billion and Vodafone's $65 billion.
On Tuesday, the South African government declared support for the deal.
Under the proposed cash and share deal, Bharti would buy about 36 percent of existing MTN shares at 86 rand each, plus half a newly issued Bharti global depositary receipt, to be listed in Johannesburg, for each MTN share. MTN pays cash and stock for an effective 36 percent stake in the Indian firm.
Some MTN shareholders, including South Africa's Public Investment Corporation which holds about 21 percent, have said Bharti should sweeten the deal as they feel it should pay a bigger premium for effective control of MTN.
Gavin Wood, a telecoms analyst at Prudential Asset Managers, reiterated that he was not in favour of a transaction based on the current terms.
MTN shares were flat at 126.15 rand by 1312 GMT, outperforming a 1.32 percent weaker JSE blue chip Top-40 index. Shares in Bharti were down 2.13 percent at 412.65 rupees.