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Bharti Airtel and MTN close to merger deal

Talks could lead to creation of the world’s third largest wireless operator

Mergers and acquisitions, Operators, Telecoms, Financial news, MTN Group

After more than a year of on-and-off negotiations, India’s Bharti Airtel and South Africa’s MTN Group appear to be close to striking a deal that could lead to a tie up between the two telecom heavyweights and create the world’s third biggest wireless operator.

Speculation is rife that the two companies are in advanced negotiation after an investor close to MTN Group said he thought a deal would “most probably” be agreed by late August.

Azmi Mikati, who is a non-executive member of MTN’s board, and whose family holds 10% of MTN Group, told news agency Reuters that there were “no major issues holding up the proceedings.”

“It just takes time to finalise and address all the issues,” Mikati said. “[…]The transaction is complex, involving multiple jurisdictions.”

The two companies announced that they had resurrected merger talks and were “exploring a potential transaction” in a statement issued in May 2009.

The statement gave details of a complex potential share swap agreement whereby MTN and its shareholders would acquire a 36% stake in Bharti, while Bharti would acquire a 49% stake in MTN.

“The potential transaction between Bharti and MTN would create a leading telecommunication service provider group aligning Bharti's market leading Indian business with MTN's market leading African and Middle Eastern operations,” the statement said.

It later emerged that Bharti and MTN could be run as separate entities for the first few years following a merger deal, in a bid to stave off political misgivings about a foreign entity taking control of one of South Africa’s most prized businesses.

Sunil Bharti Mittal, chairman and founder of Bharti Airtel, said that the management team of MTN would “remain unchanged” until the two companies are able to implement a full merger, which could be within the next few years, the Financial Times reported.

“They are two separate companies and they will be run as two separate companies until we merge, that’s the vision we have, as and when that [a merger] would be possible,” he told the UK broadsheet.

The two companies had been in a separate round of talks in 2008, which were called off in May last year by Bharti Airtel, which said that MTN had "presented a completely different structure” from what had been agreed earlier. Shortly afterwards, Bharti’s rival Reliance Communications also entered short lived talks with the South African telecom operator.