Bharti may rope in E&Y to advise on MTN deal

Bharti Airtel may ask Ernst & Young (E&Y) to do a due diligence on South African telecom major MTN, the company with which it is in talks for a complex mutual acquisition of equity to form one of the top telecom conglomerates of the world, said an executive tracking the deal. (Watch)

MTN is likely to appoint PricewaterhouseCoopers (PwC) to do a due diligence on Bharti Airtel���s books, the executive said, requesting anonymity. Two industry executives, who asked not to be named, told ET NOW that the due diligence processes could begin next week. Neither Bharti nor MTN chose to respond to detailed mails sent by ET NOW.

E&Y is likely to be the sole due diligence advisor for Bharti, India���s largest private sector telecom company. Both E&Y and PwC will get access to virtual data rooms and the due diligence is expected to take up to a month.
E&Y had also advised Reliance Communications, when the Anil Ambani-owned telco was in talks for a merger with MTN last year. At present, E&Y is Bharti Airtel���s auditor.

On Wednesday, MTN held an annual general meeting in Johannesburg, South Africa, but a top company official told ET NOW that the deal with Bharti was not on the agenda. According to this MTN executive, the AGM discussed issues such as giving powers to the board to repurchase up to 10% shares of the company from shareholders. It also considered the financial results for the year ended December 31, 2008.

The AGM re-appointed four directors to the MTN board, including Azmi Mikati of Lebanon���s Mikati family, which owns about 10% of MTN. Revised remuneration for board members was also discussed at the AGM, the MTN executive said. ���We are not going to comment about the MTN-Bharti talks,��� MTN chief executive Phuthuma Nhleko told reporters in Johannesburg after the meeting. Meanwhile, a South African daily reported that the political unrest in Iran could prove a stumbling block in selling the proposed MTN-Bharti deal to the Indian company���s shareholders.

MTN holds a 49% stake in MTN Irancell, which has a customer base of over 16 million and whose network cover more than 60% of Iran���s geographical area. Iran is also one of the largest markets for MTN. Bharti shareholders are concerned about the political risk and whether or not the deal will be dilutive, the report said.

With large-scale public protests against the re-election of President Mahmoud Ahmadinejad, the Iranian government has come down heavily on telecom companies and the media. Analysts say that MTN���s revenues from Iran are likely to witness a sharp dip in the current quarter.