Earlier this week, Bharti Airtel confirmed that it was looking at a strategic stake in MTN, which has a market capitalisation of around $37 billion, but no concrete deal had been reached.
Banking sources added that Bharti is also considering a deal under which MTN takes a stake in Bharti Airtel. These sources said the swap deal is a possibility because Bharti shares could garner a 10 to 25 per cent premium in the international market.
Sources close to the deal said Bharti is also keen to retain MTN's management, which controls over 13 per cent of the company, and might be looking at unlocking its value through a negotiated deal.
Bharti Airtel spokespeople declined to comment on these issues.
Brokerage and analyst firm Merrill Lynch believes that the transaction may not be "uncontested", but there are strong synergies if the deal materialises.
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Apart from Africa, MTN also has a large presence in West Asia and has been looking at starting operations in Pakistan and other developing nations. It is also looking at an entry into India by picking up a minority stake in Datacom Solutions, part of the Venugopal Dhoot group.
Bharti Airtel, too, has been keen on opportunities in the rest of the world, even though it has a presence in Sri Lanka and Seychelles.
MTN's three most important markets are Nigeria with 17.8 million subscribers, South Africa with over 15 million subscribers and Iran with over 9 million subscribers. South Africa and Nigeria drive 65 to 70 per cent of the group's EBITDA.
South Africa has an 87 per cent mobile penetration, while Nigeria offers strong growth opportunities with a 25 per cent penetration.
MTN also has operations in Cameroon, Uganda, Ghana and Sudan and has grown through the years both organically and by acquiring new licences in different markets.
In July 2006, MTN acquired Investcom for $3.5 billion, which added over 11 additional operations. The deal was made through a combination of debt and shares.