Bharti Airtel-MTN Merger: Second Time Lucky?

  • SumoMe

The discussions between Bharti Airtel and MTN, the largest telecom service providers in India and Africa have been renewed. The two companies are in exclusive discussions till July 31st, 2009 about a full merger in which Bharti Airtel will acquire a 49 percent stake in MTN whereas MTN and its shareholders would take a 36 percent stake in the Indian company.

If this deal is successful, this joint venture would have the third-largest number of subscribers in the world (about 200 million), after Vodafone and China Mobile, with annual revenues in excess of $20 billion. Presently, MTN stands on the 10th position globally in terms of the number of subscribers while Bharti Airtel follows at the 11th. China Mobile leads the ranking followed by Vodafone.

The introduction of new schemes in the market is also likely and the prices might fall since it’ll be a virgin market for such a huge merger and acquisition.

Also, by continually working with the same company, the employees become not only complacent but also start working in a limited frame. A merger, however, gives them new opportunities to showcase their talent and exploit it further because of the involvement of a new management. This can also mean that this merger might generate employment, which will truly be a blessing in these times.

The primary reason this negotiation had reached a standstill last year was that MTN had requested about USD 50 billion for its shares which would have made Bharti Airtel its subsidiary. But this year, it is likely that MTN will step down because Bharti Airtel’s position in the market has improved manifold.

Then again this year, there are several other factors which can dissuade the deal from being finalized. When the announcement for the renewal of this deal was made, Bharti’s stocks dropped by 6%, while MTN’s lifted by 9%, which isn’t very good news for the shareholders of Bharti. Apart from this, a Delhi based non profit organization, Telecom Watchdog has challenged this deal, stating that if at all this merger is successful, Bharti will breach India’s foreign ownership rules under India’s 2005 New Telecom Policy which states that foreign ownership and investments in telecommunications interests are capped at 74%.

Although if this merger proves successful for India, this glitch in the policy should be more than just excusable since not only will it be profitable just for the employees of the two companies involved but also for the country.

Despite the fact that both the companies are enthusiastic about this merger and have been trying to negotiate for a while now, a lot of analysts are skeptical about it. Essentially because of how it turned out last year, they feel that it might fall to pieces yet again and is still in just the nascent stage.

Should the negotiations lead to something is executed, it’ll be the largest non-pharmaceutical transaction of 2009. And after that it’s for the world to see if it makes Bharti Airtel and MTN the leading telecom networks of this world or falls flat on its face. Though the world will hope with bated breath that the latter is not the case.

Kashika Saxena

[Image courtesy: http://theviewspaper.net/wp-content/uploads/2009/07/bharti-airtel-mtn.jpg]

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