Bharti pulls out of MTN deal

Bharti has decided to disengage from the ongoing talks with the South African telecom major, MTN, to explore the possibility of a merger between the two "emerging markets" telecom giants.

Bharti has already conveyed its decision to pull out of the talks to the MTN board, after discussions that continued till late last night could not achieve a breakthrough.

According to a statement issued by the Bharti group, the decision to pull out of the talks was prompted by its consideration that the new structure proposed by the MTN board would not have been in the interest of Bharti Airtel's minority shareholders and in its plans for growth as an Indian telecom multinational.

A few weeks ago and at the invitation of MTN board, Bharti had entered into exploratory discussions on the possibility of combining the two 'emerging market' telecom giants. A number of structures were discussed and evaluated between the lead bankers on both sides. An in-principle agreement was also reached on May 16 and a term sheet was initialled between the two lead bankers.

On May 21, according to the Bharti statement, the agreed term sheet was presented to the MTN Board.

However, MTN has now presented a completely different structure, from what was agreed. This new structure envisages Bharti Airtel becoming a subsidiary of MTN and exchange of majority shares of Bharti Airtel held by the Bharti family and Singtel, in exchange for a controlling stake in MTN.

Bharti believes that this "convoluted way of getting an indirect control of the combined entity would have compromised the minority shareholders of Bharti Airtel and also would not capture the synergies of a combined entity".

Bharti also believed that its vision of transforming itself from a home grown Indian company to a true Indian multinational telecom giant, symbolising the pride of India, would have been severely compromised.

The Bharti statement also pointed out that the reference price at which MTN shares were to be transacted was agreed and frozen at the point of starting the discussion and Bharti would like to confirm that there was no further discussion on the share price of MTN, at any point.

This is in line with Bharti's highly disciplined approach towards any acquisition and consistent with Bharti's philosophy that it will not engage in a bidding war at any stage, the statement noted. Bharti had obtained letters of confidence from over a dozen internationally reputed bankers from the US and Europe to provide funds of over $60 billion to facilitate the proposed merger.