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Bharti Airtel and MTN end merger talks

South African government cited as main reason for failure to secure deal

Bharti Airtel and MTN end merger talks
Bharti viewed Africa as an opportunity to maintain growth in a key emerging market.

South Africa's MTN Group and India's Bharti Airtel have called off merger talks that could have led the creation of the world's third largest wireless operator behind China Mobile and Vodafone.

Bharti Aitel, India's biggest mobile operator, cited the South African government's refusal to accept key aspects of the deal as the main reason for calling off the talks.

"This structure needed an approval from the government of South Africa, which has expressed its inability to accept it in the current form. In view of this, both companies have taken the decision to disengage from discussion," Bharti said in a statement.

"We hope the South African government will review its position in the future and allow both companies an opportunity to re-engage."

It is thought that the South African government objected to plans for the merged company to be dual-listed on the stock exchanges of Mumbai and Johannesburg, according to a report in the Financial Times.

The development comes as a major blow to Bharti, which viewed expansion into Africa as a means to maintain growth as competition intensifies in its home market.

The two companies started merger talks May 2009, and had given details of a potential deal based on a 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 proposed transaction would have been the single largest Foreign Direct Investment into South Africa and one of the largest outbound FDIs from India.

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