India's top mobile phone company Bharti Airtel and South Africa's flagship MTN cellular firm Thursday extended merger talks for a second time in a bid to forge an emerging market telecoms giant. The exclusive discussions, prolonged by another month to September 30, "continue to progress satisfactorily," the firms said in separate statements.
"If they're willing to extend, it means they're trying their best to get a deal," said Romal Shetty, India telecoms head of global consultancy KPMG. The extension came amid persistent reports that MTN shareholders are holding out for Bharti to improve the terms of the estimated 23-billion-dollar proposed agreement.
A merger between the two would create the world's third-largest mobile phone operator by subscribers that would straddle Africa, Asia and the Middle East. The extension of the talks followed a report by India's Hindustan Times newspaper, quoting an unnamed source, that the deal might need to be "completely restructured" so "there is more value in it for MTN shareholders."
But the source added the talks were moving "in the right direction." Earlier in the month, both companies said the "structure and terms of the potential transaction may be adjusted to reflect further discussions." The proposed merged company would have more than 200 million subscribers and 20 billion dollars in annual revenues.
Under the initial plan, Bharti would be the biggest single stakeholder in the merged group, taking a 49 percent stake in MTN using cash and global depository receipts (GDRs). Shareholders of MTN would have a 36 percent interest in Bharti through cash and stock.
"From their perception (MTN's), they are not getting so much value," said telecoms analyst Harit Shah of Mumbai's Angel Broking. But for both companies, this agreement "is a necessity for their global expansion - that's the driving factor," Shah said.
The two phone companies re-entered tie-up talks in May, a year after Bharti ended negotiations in a dispute over control. The courtship collapsed after the South African firm proposed an ownership structure that the Indian company, which aims to become a multinational telecom giant, said would have involved "Bharti Airtel becoming a subsidiary of MTN."