MTN - THE
Indian Telecom Sector
• Fastest Growing Sector – CAGR 22% (2002-07)
• Second Largest Telecom Market
• Total mobile services revenue in India is projected
to grow at a compound annual growth rate (CAGR)
of 12.5 percent during 2009-2013
• The telecom subscriber base is expected to cross
770 million connections by 2013, growing at a
CAGR of 14.3 percent from 452 million in 2009
Revenues of Indian Telecom Industry: 2002–07
Group Company wise % market share - Aug'2009
Sl. No. Name of Company Total Sub Figures % Market Share
1 Bharti Airtel 10,79,96,533 32.19%
2 Vodafone Essar 8,08,74,460 24.11%
3 BSNL 5,20,56,417 15.52%
4 IDEA 5,00,58,471 14.92%
5 Aircel 2,44,15,514 7.28%
6 Reliance Telecom 1,32,81,225 3.96%
8 MTNL 43,52,781 1.30%
9 Loop Mobile 24,17,446 0.72%
All India 33,54,52,847 100.00%
• Established : July 07, 1995, as a Public Ltd. Company.
• Business Description : Provides Mobile, Telemedia
services(fixed line) and enterprise services(carriers &
service to corporates)
• Largest Private Integrated Telecom Company in India
• 3rd Largest Wireless Operator in the World and Largest &
Fastest Growing Wireless Operator in India
• Largest Telecom Company listed on Indian Stock
Performance till date
• Bharti Airtel has enjoyed an excellent run ever since
the telecom sector opened.
• It has managed to hold on to its leadership position
inspite of the presence of other players with deep
pockets – Ambani’s, Tata’s, Birla’s and Vodafone.
• Has coped well with regulatory changes.
• Continues to attract and delight customers.
• Translate its expertise in Indian markets to other
• This could call for acquisitions globally.
• To explore international expansion opportunities
that are consistent with its vision and bring value to
• Indian market inspite of being the worlds largest is
still not matured. Opportunities abound in the
hinterland which must be exploited.
THE VISION OF
EXPANSION LED TO
TALKS OF ACQUISITION
OF SOUTH AFRICAN
TELECOM GIANT MTN
Why MTN?? ??
• M-Cell incorporated MTN in South Africa Launched in 1994
• Is a leading provider of communication services, offering
cellular network access and business solutions
• Is a multinational telecommunications provider
• Core operations in 24 countries in Africa and the Middle East
• Presence in key markets such as Nigeria, Ghana, Cameroon,
• Regardless of recession at the end of December 2008, growth
expanded by 48% to 90,7 million recorded subscribers
• Group subscribers up 14% to 103,2 million from December
• Listed in South Africa on the Johannesburg Securities
Exchange (JSE) under the Industrial – Telecommunications
TALKS BEGAN IN MAY 2008
• MTN asked for $50 billion, Bharti was willing to go up to
• Bharti offered the chairmanship of the post-deal entity to
Matamela Cyril Ramaphosa, the non-executive chairman
• Bharti offered 70 per cent stock and 30 per cent cash,
MTN's preferred ratio was 50-50.
• Bharti offered 170-175 rand per share to MTN
shareholders, But four of MTN's largest shareholders
wanted at least 180 rand per share
Structure of the Deal entered in
• Bharti looked to acquire 51 percent stake in MTN while MTN wanted
Bharti to buy out the 100 percent stake
• Bharti had arranged funds through debt for buying about 51 percent
• 100% stake was not possible as the net profit of MTN stands at $1.4 billion,
which would not have been enough to service the debt that is required to
complete the deal.
• As per Broad-Based Black Economic Empowerment regulations, 20 percent
of the ownership of a company operating in South Africa needs to be with
the black people.
• But, for this the merged company needs to get itself listed in the South
African stock market which was a long and complex process
• Crossing the limit of FDI was also a concern for Bharti Airtel
CALLED OFF THE MUCH
HYPED DEAL BETWEEN THE
TWO TELECOM GIANTS
If the deal was through it....
• Would create the world's sixth largest mobile
operator, boasting over 130 million subscribers in
more than 24 countries
• This transaction would have been the single largest
FDI into South Africa and one of the largest
outbound FDIs from India
• India’s biggest Cross-border deal, almost thrice the
size of Tata Steel’s $13 billion buy of Corus in 2006
• New and bigger market for Airtel to explore other
than India and Sri lanka
RCOM, MTN MERGER TALKS
STARTS SOON AFTER
FAILURE OF BHARTI-MTN
The Unsuccessful deal..
• Anil Ambani group company RCOM started discussions
for a possible tie up with MTN
• Agreed on a 35:100 swap formula i.e. RCom
shareholders will get 35 shares of the merged entity for
every 100 RCom shares they hold.
• The merged entity would be valued at an estimated $36
billion, with revenues of over $14 billion and an operating
profit of nearly $6 billion with over 100 million customers.
• But as per the family settlement signed in 2005 RCom
may have to be offered to Mukesh before being sold to
• The deal was called off due to certain regulatory issues
as per the officials of both the companies
Bharti, MTN Re-Engage in
Merger Talks On May26,2009
• As per the proposed structure, Bharti would have
acquired 49% shareholding in MTN
• In turn MTN and its shareholders would acquire about
36% economic interest in Bharti.
• As per the provisions of the Takeover Code of SEBI
Bharti cannot acquire any voting rights through the
• The South African government demanded dual listing of
MTN in order to protect the character of MTN as South
• India Denied MTN for dual listing
• The deal was again called off
• If we go by the sources the deal fell through because of
South Africa's political compulsions
Why India said no to dual listing??
• In India dual listing is not permitted under SEMA and the
• Would have affected India’s foreign direct investment
• Would have led to huge tax losses to the government
• Would have weakened the oversight of market regulator
SEBI as it would not be able to monitor overseas stock
• Structure would have led to an export of capital market
• It also had risks of multi-currency settlement
Concept of Parallel listing
• In a latest development, the South African
treasury insisted on a parallel listing via the
• Such parallel listing would see two trusts being
listed, one in India and one in South Africa.
• Both trusts would mirror a share swap deal.
• Such parallel listing would have been compliant
with existing Indian laws
• Capital account convertibility would not arise.
• The deal appeared to offer growth as well as scale to both
• MTN offered Bharti more growth options than the other way
• Average revenue per user for Bharti($11) is quiet less than
• Big shareholders, along with Treasury and the General realised
that global depositary receipts (GDRs) are pretty worthless to
• The convertibility of the rupee in India was the main obstacle
• Indian government is not willing to change laws for a single