S African mobile giant MTN faces ‘identity crisis’ in Bharti deal

Johannesburg, Aug 30 (Inditop.com) MTN’s $23 billion deal to merge with the Indian telecom major Bharati Airtel is being delayed as the company does not want to “lose its identity” and wants its South African base to be the “mother ship” of the new entity that will span two continents.

MTN CEO Phuthuma Nhleko that the deal is a “big and complex transaction” and the company has to ensure that it “continues to grow from its South African base and does not lose its DNA”.

“We do not want to repeat what happened some 10 years ago when there was a wholesale movement of capital from South Africa,” Nhleko told the Sunday Times.

“We are trying to achieve our strategic objectives while the financial objectives must remain palatable. We must ensure that the South African base is the mother ship from which the company continues to grow.”

The proposed deal will see Bharti get a 49 percent stake in MTN with the latter getting 36 percent in the Indian company.

The two will merge to become a massive global player, with 200 million subscribers between them and MTN will gain instant access to India, where Bharti has a market share of around 25 percent.

Nhleko said MTN’s size meant that opportunities for growth from greenfields operations in Africa and the Middle East were increasingly limited. This meant growth through mergers and acquisitions, probably outside Africa and the Middle East, where it is has huge interests. ”

“For us, the logical conclusion is that it has to be eastwards. About 70 percent of new global subscribers in 2010 will be from China and India,” Nhleko said.

Analysts here speculate that the deal was being delayed because Bharti would end up in a preferential position but Nhleko was adamant that it was based on a strategic partnership involving cross shareholding.

“What’s ideal is a full integration. But there are all sorts of regulatory, political and national identity issues we have to consider if we were to fully integrate the companies,” Nhleko said.

Nhleko said while the focus has been on MTN and Bharti, there is another important player in the deal – Singapore Telecommunications (SingTel), the Singapore exchange’s biggest company and a 30 percent shareholder in Bharti.

He said SingTel was “an integral part of the deal”, not only because it will lower costs but also because of additional synergies.

“SIngtel has a strong innovative hub in Singapore and there is an understanding that there will be symbiosis, and we will then have a far larger innovative base,” Nhleko said.

The two groups broke off negotiations last year but have been talking again, at least officially, since the end of May. They have extended their deadline a few times and now have until the end of September to reach an agreement