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MTN Becomes M&A Magnet

MTN Group Ltd. , one of the world's biggest emerging markets mobile operators, is holding takeover talks with Indian giant Bharti Airtel Ltd. (Mumbai: BHARTIARTL) and is likely to attract inquiries from other interested parties, according to company statements and analyst research notes. (See Bharti Eyes MTN and Top Ten: Emerging Markets Carriers.)

In a statement issued to its shareholders, MTN, which has more than 68 million subscribers in 21 markets in Africa and the Middle East, noted that talks with Bharti have begun, but that "the discussions are exploratory in nature and may or may not lead to any transaction." (See MTN Reports Q1 Subs and MTN Reports 2007.)

Bharti confirmed the nature of the current discussions as it dispelled talk of a solid bid. In a statement issued Tuesday the carrier noted:

    Bharti would like to clarify that it has not made any offer to acquire the whole or part of MTN. Therefore, the speculation around a bid by Bharti in a section of the media is incorrect and misleading. Details of any transaction will be released promptly, if and when, the parties reach agreement. As a responsible listed company, Bharti will continue to uphold the highest levels of transparency and corporate governance.

Other bids expected
Analysts at UBS AG believe other bidders are likely to emerge. The UBS team believes rival bids could come from China Mobile Ltd. (NYSE: CHL), Global Cloud Xchange , and Vodafone Group plc (NYSE: VOD), according to a report from Bloomberg.

Those three potential rival bidders are all keen on expanding their presence in under-developed emerging markets: China Mobile has already stated its international expansion intentions; Reliance has already begun its African adventure; and Vodafone has long been pursuing footholds in new markets and is one of MTN's competitors through its stake in South African operator Vodacom Pty. Ltd. . (See Reliance Makes African Acquisition, China Mobile Heads West, Vodafone Wins Battle to Buy Essar, and Vodafone Tops 200M, Talks M&A.)

Bharti, India's biggest service provider by subscriber numbers, is keen to spread its wings overseas. Its interest in MTN is supported by Singapore Telecommunications Ltd. (SingTel) (OTC: SGTJY), which is already benefiting from its investments in high-growth international markets, including a 30.5 percent stake in Bharti. (See Bharti Profit Climbs on Subs Growth, India Crosses 10M Mobile Adds in March, SingTel's Q3 Rides Emerging Markets, and A Guide to India's Telecom Operators.)

But MTN won't come cheap: If Bharti, or any other buyer, wants to take a majority stake in the pan-African operator, it will need to find at least $19 billion, based on MTN's current market value of $37 billion.

The M&A action in Africa isn't restricted to MTN, though, as other carriers beef up their presence in the continent through partnerships and acquisitions in an effort to find new pockets of subscriber and sales growth. (See Operators Tap Into African Growth, Emerging Markets Drive FT's M&A Plans, Telkom SA Spurns Oger, Telecom Italia Eyes Emerging Markets, Reliance Makes African Acquisition, and FT Buys Again in Africa.)

— Ray Le Maistre, International News Editor, Light Reading

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