The Hindu Business Line : Bharti-MTN alliance talk gets a boost; key investor backs the deal

New Delhi, May 9 Bharti Airtel’s bid to strike a strategic partnership with South Africa-based MTN may have got a boost with one of the key investors in the company supporting the deal.

The Makati family, led by former Lebanese Prime Minister Mr Najib Makati, has indicated that two companies could become a unique mobile player in emerging markets. The Makati’s hold 9.8 per cent stake in MTN through their London-based M1 Group.

Bharti will, however, have to convince other stakeholders including Alpine Trust, a consortium of MTN management and a private family, which is the single largest shareholder with 23 per cent stake in MTN. South Africa Government Pension Fund holds 13.5 per cent.

Sources said that though Bharti wanted to pick up a controlling stake in MTN, talks may be steering towards a ‘marriage’ between the two companies. “A deal should be in place soon. While the two sides have agreed on the basic principles, the structure of the agreement is being worked out,” sources said without indicating whether Bharti has made a financial offer yet.

S&P rating

Meanwhile, Standard & Poor’s Ratings Services said Bharti Airtel Ltd’s announcement on holding an exploratory discussion with MTN Group, by itself, would not have an impact on the ratings on Bharti, as the discussions are still preliminary. “If the company makes noticeable progress in these discussions and the possibility of a significant investment or acquisition increases, we are likely to place the ratings on CreditWatch with negative implications. This will signal rating pressure stemming from the financing and the incremental debt required to fund the outlay for the potential transaction.

“Standard & Poor’s currently views that there may not be any upside potential in the ratings, if Bharti indeed pursues a significant investment or acquisition in MTN,” S&P said.

While a prominent overseas investment adds diversity to Bharti’s businesses and cash flows, the financing and the debt requirements are of greater concern, especially since Bharti has budgeted capital expenditures of about $3.3 billion a year, it added.