Bharti targets biggest takeover by Indian firm

The mother of all Indian corporate takeovers may just be brewing.

After days of speculation, South African telecom major MTN and India's leading mobile telephony firm Bharti Airtel late on Monday came out in the open to confirm that they were in talks.

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If talks translate into Bharti buying MTN, it will dwarf Tata Steel's acquisition of UK-based Corus for around $12 billion. That's because MTN's market capitalisation stands at $37 billion against Bharti's $43 billion.

Reports say Bharti would have to shell out a hefty premium to MTN's current share price of around 150 rand.

Interestingly, Bharti may not be alone in bidding for MTN.

Reports say UK's Vodafone and China Mobile may be sniffing around too, apart from Reliance Communications.

Bharti officials had said some time back that the company wants to hold controlling stake in telcos across some of the emerging markets globally, so that its model of low tariff and high usage could be replicated there.

MTN has 68.2 million subscribers across 21 countries. It wants to be seen as an 'emerging markets operator" rather than just a player in Africa and Middle East. Bharti has 62 million subscribers in India.

A report by Swiss bank UBS had last week pointed out that Bharti believes that its low-cost business model for a low-affordability, high population country such as India could be transported to other emerging markets.

That would explain Bharti's interest in MTN.

An investment banking source told DNA that Bharti had evaluated the possibility (of buying into MTN) some years back also, but didn't pursue it. "They (Bharti) might evaluate again," he said.

Global analysts have said that Bharti should be prepared to pay a hefty premium, if it wants to buy the South African telecom giant.

But Bharti may even buy a stake in MTN, rather than buying the firm in entirety.

After a board meeting of MTN in Johannesburg on Monday, the company said that it was in talks with Bharti. "The discussions are exploratory in nature and may or may not lead to any transaction. Accordingly, shareholders are advised to exercise caution when dealing in the company's securities until a further announcement is made," MTN said in a statement.

Quite in sync with the MTN statement, the Bharti spokesperson in New Delhi said on Monday, "Bharti Airtel has entered into an exploratory discussion with MTN Group Limited, South Africa. Current discussions are still at an early stage, are exploratory in nature and may or may not lead to any transaction."

The MTN Group's stock price climbed to a record high in Johannesburg trading over the news that Bharti was planning a bid for the company, according to agency reports.

A detailed e-mail questionnaire sent by DNA to Pearl Majola, spokesperson for MTN, remained unanswered.

Last week, Bharti group chairman Sunil Mittal had told the media on the sidelines of a press conference that "nobody has invited us to make a bid." Mittal had said, "It's hypothetical to ask questions on whom we are interested in and who is interested in us."

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However, he had stressed that Bharti "is looking for opportunities all the time. Bankers do approach us with proposals, and we evaluate that at an appropriate time". He had indicated that such an evaluation may result in making a move to bid for a company.

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