Bharti may team up with investors to acquire MTN

NEW DELHI: Bharti Airtel is learnt to be evaluating the option of forging a consortium comprising key MTN shareholders, the Mikati family and the employee-owned Newshelf, and possibly SingTel, in its bid for the South African telco. While the Mikati family and Newshelf through the Alpine Trust own 23% in MTN, it is believed that in addition, Bharti will try to negotiate an agreement with MTN shareholders to pick up 30% equity and make an open offer for another 20%.

The consortium will thus hold around 74%. In return, a structure may be devised which will enable the Mikati family and Newshelf to indirectly hold shares in Bharti Airtel.

The Bharti spokesperson refused to comment on the development. ET has been unable to obtain individual confirmations on these developments from Bharti Airtel���s top executives. A reliable source told ET that Bharti is looking at several options and will take its time before proceeding further. The Bharti top brass, including chairman Sunil Mittal, who met with top MTN officials earlier this week in London, have returned.

In an encouraging development for Bharti, a member of the Mikati family and chief executive of M1 Group, through which the family has invested in MTN, told a news agency that he is supportive of a merger between MTN and Bharti Airtel and expects terms of the deal to be finalised ���soon���. ���I don���t see the Bharti transaction as a sale. It is combining two great assets into what could become a unique player in the emerging markets of the mobile industry,��� said Azmi Mikati.

���The discussion (with Bharti) is being led by MTN���s management and we have full confidence in the management... We are supportive of any decision the (MTN) management takes.��� He said M1 sees Bharti as good partner for MTN because of its track record in India. ���We have seen what Bharti has done in India and it���s exceptional.���

While Bharti has reportedly offered an indicative price of 160-165 rand per share for acquiring stake in MTN, it has so far denied making any bid.

Some MTN shareholders are learnt to have said the bid price should be around 200 rand and if that is indeed the price then the valuation will be significantly more than the $35-billion figure that was being quoted earlier. Analysts��� reports have pegged the valuation of MTN at $45 billion. Mr Mikati declined to comment on the price of the transaction.

If the consortium does materialise, one of the possibilities is that it could be in the form of a special purpose vehicle (SPV) in which financial investors and SingTel could take stake, thereby increasing the financial clout of this SPV to make an attractive bid. There is no confirmation to this effect.

But, for the consortium idea to work, both the Mikati family and the key members of Newshelf, which include the telco���s chief executive officer Phuthuma Nhleko, finance director Rob Nisbet, and chief operating officer Sifiso Dabengwa, will have to agree. It has been reported earlier that Bharti wants continuity in top management of MTN and is ready to give senior MTN officials a large role in the MTN-Bharti combine. For the Mikati family, industry source say, the advantage is that it will be able to retain its interests in MTN and may also have an indirect stake in Bharti Airtel.

The Mikati family of Lebanon owns 10% and Newshelf owns 13% in MTN through the Alpine Trust. Industry sources say that retaining the Alpine Trust within this consortium will also enable Bharti to comply with South African regulations, which stipulate that a minimum 25% of a local company���s equity and 40-50% management control with local blacks. In addition to the Alpine Trust, the other major shareholder in MTN is PIC, a South African pensions fund, which owns 13.5% in the company.