MTN, Bharti renew hopes for a merger

MTN of South Africa, and India's Bharti Airtel kicked off renewed discussions this week, fanning hopes that the two companies will merge and form one of the world's biggest telecommunications networks.

The merger between MTN, Africa's largest mobile service provider, and Bharti was almost concluded last year. But the two companies disagreed on a sharing structure and control of the companies, which would have over 200 million customers and US$20 billion in annul revenue.

MTN CEO Phutuma Nhleko said the mobile operator is excited by the merger discussions, adding that a deal will not result in job losses.

In the first attempt to merge, Bharti Airtel is said to have secured $60 billion towards the deal but pulled out, amid claims that MTN had changed terms of the deal.

If the previous merger had succeeded, Bharti Airtel would have become a subsidiary of MTN, a position that Bharti Airtel was not willing to accept. MTN, which has a presence in 21 countries in Africa and the Middle East including Zambia, Uganda, Nigeria, and Iran, had pushed for a100 percent buy out of Bharti.

"We are happy with the prospects of teaming up with India's number one mobile service provider with a leading position in fast-growing mobile markets globally," Nhleko said.

This time around, MTN has said it would agree to Bharti Airtel acquiring approximately 49 percent shareholding in the company. In the failed discussions, Bharti Airtel was asking for a 51 percent stake in a $23 billion merger deal.

Bharti Airtel has already received a commitment from the Standard Chartered Bank in the U.K. to raise a $4 billion bridge loan to finance its purchase of a stake in MTN.

Early this month, MTN announced that it has reached a 100 million subscriber mark, consolidating its position as the largest mobile service provider in the region with a market capital of $28 billion. Many companies, including another Indian operator, Reliance Communications, have tried in vain to strike a deal with MTN.

Pressure on MTN to remain an African company has made it difficult to find a foreign partner. If the proposed deal goes through this time, MTN would be able to use Bharti Airtel's technology and techniques for expanding its network quickly across geographical boundaries. In the current investment climate, entering a new country, building infrastructure and coming to terms with a new culture is risky, so MTN is prepared to proceed with the merger.

The deal will also help Bharti Airtel to expand its business to many areas and increase the company's revenue.

While the companies have said they are ready to join forces and serve Asia, Africa and the Middle East, they are working out how the merged companies would be managed and where it would have its headquarters. MTN is based in Johannesburg and Bharti Airtel has its headquarters in New Delhi.

MTN is implementing a program aimed at empowering black South Africans economically.

MTN wants the deal to be handled in a way that does not create an impression that the company is foreign owned. This could lead the country's communications union and the black community being assisted by the company to take the matter to court to block the deal.