Bharti Airtel, India’s leading mobile operator, may seek a merger or share swap with MTN Group to try to avoid a bidding war for the South African phone firm, analysts and media reports say.
The reports helped push up Bharti shares on Thursday after the stock had fallen sharply last week on investor concerns over funding a deal that could top $20 billion and the risk of a bidding war.
A successful deal would be India’s biggest foreign acquisition and create the world’s sixth-largest mobile operator, with more than 130 million subscribers in more than 20 countries.
“What I feel is they want to cool off the situation after some international players said they are also interested in MTN,” said R.K. Gupta, managing director of Taurus Asset management.
Emirates Telecommunications (Etisalat) said on Monday it was evaluating a possible bid for MTN, and China Mobile, the world’s biggest mobile carrier, has said it is interested in the South Africa market, but has not bid.
The Financial Times reported last week that Bharti had made an indicative bid of 165 rand per share for 51 percent of MTN, valuing it at about $37 billion. This week, the Asian Wall Street Journal said Bharti might raise that to 175 rand.
Bharti has said it is in exploratory talks with MTN, but has made no bid. The head of SingTel, which owns 30.5 percent of Bharti, has said talks were “at an extremely preliminary, exploratory stage.”
Indian newspapers have speculated that Bharti may opt for a cash-and-stock deal, with the Economic Times saying on Thursday Bharti would value MTN at $45-$50 billion and offer 60 percent of a deal in cash and the rest in shares.
Other papers put the cash-to-stock ratio at 30:70 and 50:50.
The Mint, citing people familiar with the talks, said the MTN board may consider a merger proposal as early as next week.
A spokesman for Bharti declined comment on the reports.
Bharti and MTN could opt for “some sort of a joint venture with both having cross-holdings”, Gupta said. “If such a thing really happens, it is a positive news as there are concerns about financing such a big deal.”
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