Talks between India's top mobile firm Bharti and South Africa's flagship cellular group MTN may have to be extended due to new hurdles in their bid to create a telecoms giant, analysts say.
But a deal could still emerge despite regulatory obstacles that have cropped up in the complex $24-billion share-swap negotiations, they said.
The latest deadline set by Bharti Airtel, owned by tycoon Sunil Bharti Mittal, and MTN to wrap up exclusive talks to create the world's third-largest mobile phone operator by subscribers expires Wednesday.
Many analysts believe the companies will announce a third extension of the talks, which began in May aimed at forging a telecom powerhouse with annual revenues of over $20 billion and 200 million customers.
"The two parties may come out with preliminary details, which may be possible before the end of the month, but there's no way a deal can be concluded," said investment analyst Rajay Ambekar of Prudential South Africa.
"We'll most likely see another extension," Ambekar told AFP.
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Under the initial plan announced in May, Bharti would be the biggest single stakeholder in the alliance, taking a 49-per cent stake in MTN using cash and Global Depository Receipts (GDRs).
Shareholders of MTN would have a 36 per cent interest in Bharti through cash and stock.
"The two bodies are principally okay with the structure that they have been talking about," said Gartner telecoms analyst Madhusudan Gupta.
But demands earlier this month by the South African government for a dual stock exchange listing to preserve MTN's South African identity have created a last-minute hitch.
A dual-listed company involves two listed companies which have different sets of shareholders but share ownership of a single business. South Africa allows dual listing while India does not.
The South African government, which indirectly holds over 21 per cent in MTN, said it was unwilling to sacrifice the firm's "South African character" and raised the idea of dual listing as a compromise.
But allowing dual-listed companies would involve major changes in India's foreign exchange and stock market laws -- something the government says cannot be done immediately and not to facilitate one corporate deal.
Then, in another complication, India's stock market regulator last week tightened takeover rules.
It said regulations on triggering an open offer now would apply to bidders acquiring Global Depositary Receipts with voting rights in an Indian company.
MTN might then need to make a mandatory offer for another 20 per cent of Bharti on top of the original 36 per cent it planned to acquire, analysts say.
That would make the deal more expensive for MTN and push the foreign investment in Bharti over the 74 per cent limit stipulated by Indian law as there are other foreign investors which hold Bharti shares.
The regulatory aspects "look to be a challenge" but "I don't think the talks will fail on these grounds," said Gartner's Gupta.
"I think they might just have to extend the talks."
In one positive sign, Indian Premier Manmohan Singh met South African President Jacob Zuma on the sidelines of the G-20 summit of rich and emerging nations in Pittsburgh last week to say he supported the deal.
He said in comments aired on Indian TV on Saturday that he told Zuma he "sincerely hoped this deal would go through".
"It has been agreed this matter can be further discussed with the government of South Africa," he added.
In another positive signal, Indian TV station CNBC-TV18 quoted unnamed South African government officials as saying they were positive on the deal for the "growth of MTN and Bharti".
Still, analysts say even if a deal is reached, MTN shareholders may not be happy over the price offered.