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Doubt cast over telecom operator mega deals

Politician’s statements put question marks next to MTN/Bharti tie-up and Zain stake sale

Doubt cast over telecom operator mega deals
MTN and Zain are locked in sets of talks that would see controlling stakes in the telcos passed on to firms based outside their borders.

Politicians in Kuwait and South Africa have cast doubt over two separate deals that if ratified would see both of their country’s largest telecom operators taken over by foreign firms.

South Africa and Kuwait’s biggest telecom operators, MTN and Zain, are locked in sets of talks that could see controlling stakes in both telcos passed on to firms based outside their borders, with a Malaysian-Indian consortium lined up to buy a 46% stake in Zain, and Indian telco Bharti chasing an initial 49% share of MTN.

The period of exclusivity for talks between MTN and Bharti is due to expire at the end of this month, and according to a Financial Times report the South African firm may encounter problems signing a deal that would eventually give Bharti management control of the company in a cash and share deal worth US$23 billion.

The report claims that when negotiations took place last year between MTN and another Indian telco, Reliance Communications, South Africa’s then finance minister Trevor Manuel told MTN chairman Cyril Ramaphosa that the country’s “strategic corporations” should be retained onshore.

A dual listing was suggested by Manuel, but this was ruled out due to the complexities of Indian regulations.

Meanwhile, Kuwaiti MP Ahmad al-Saadun said that the Kuwait government has a responsibility to protect public funds through its 24% stake in Zain and small investors who could suffer as a result of the sale and contradictory information, according to a report by newswire AFP.

Saadun said there had been a "lack of transparency" surrounding the Kharafi Group’s sale of its stake in Zain and he warned that “contradictions” could negatively impact the Kuwaiti stock exchange and economy.

The Kharafi Group, which was thought to own 10% of Zain’s shares but appears to have amassed a total holding of 20%, said last week that it had signed an agreement with a Malaysian-Indian consortium for the sale of a 46% stake in Zain for US$13.7 billion.  The additional 26% is thought to be made of smaller shareholders.

Saadun added that after the agreement was signed two of the companies mentioned in the consortium - India's Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited - denied they were part of the deal, and in a joint statement last week both firms said they had not yet decided whether to join the consortium.

India’s ambassador to Kuwait Ajai Malhotra, who attended the signing ceremony, said that the two Indian companies were undertaking due diligence.

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