Bharti/MTN: Politicking around the alliance of MTN and Bharti has spilled into the open. Some noise was always to be expected. But the sudden step-up in rhetoric should unnerve investors in the emerging-market telecom giants.
The din comes after four months of apparent calm during which bankers have been thrashing out terms for the agonisingly complex tie-up. The proposed deal would see South Africa’s MTN effectively end up being controlled by Bharti, its Indian counterpart.
Two weeks ahead of the already twice extended deadline for an agreement, South Africa’s regulators are making the most noise. The Treasury Director-General and Independent Communications Authority of South Africa (Icasa) have had their say. The Minister of Communications even warned that it is necessary “to keep the family silver at home”, adding that it was “important [that] MTN retains its character as a South African company”.
Such fears may appear unwarranted. MTN isn’t state-owned, nor is it a custodian of South African natural resources. And technically, the deal isn’t even a takeover, assuming the final agreement mirrors the structure first proposed in May. This envisaged Bharti taking a 49 per cent stake in MTN, and the South African side in turn taking a 36 per cent stake in Bharti.
The rhetoric reflects how much South Africa’s relatively young government under Jacob Zuma is anxious to assert its nationalistic credentials when a parade of companies are marching towards or flirting with foreign peers. Mobile operator Vodacom was earlier this year snapped up by Britain’s Vodafone, a deal which Icasa attempted to block at the eleventh hour. Miner Anglo American has attracted interest from Switzerland-based Xstrata.
But for all the bluster, South African political pride may be easily assuaged on this occasion. One solution would be a dual listing for India’s Bharti in Johannesburg, instead of offering MTN shareholders global depositary receipts. Comments from India’s finance minister suggest that need not be a stumbling block.
Yet even if the tie-up gets the regulatory green-light this time, there is no certainty that a subsequent full-blown $64 billion merger — with potentially mouth-watering synergies for investors — would also be waived through. Next time round, the political uproar may be even louder.
