It was not so long ago when Bharti Airtel announced the acquisition of 100 millionth Subscriber in India. Now it has stunned everyone by announcing revival of merger talks with MTN Group,South African Telecom major.
The talks is however in preliminary stage but it seems that this time market is assured of a final outcome. This action would fulfill long awaiting wish of Bharti Airtel to mark a global foot print in Telecom Services.
Currently Bharti Airtel is the largest telecom operator in India controlling a market share of 33% in India.
The merger, if succeeds would create the 4th largest Telecom powerhouse globally spanning across 22 countries(17 in africa,5 in middle-east).The deal would also bring 200 million subscriber under the merged entity.The combined entity would cloak an estimated revenue of around US$ 20 billion.
The merger is said to be in a complex manner wherein both companies would pay cash and equity for stakes in each other. Bharti in the end would be forking out a net cash of around $4.1 billion along with equity stake to MTN stakeholders.
Bharti is said to be getting a 49% economic interest in the final merged entity.The shares of the merged entity would also get listed on Johannesburg stock exchange in the form of GDR.
The deal would also provide it entry into lucrative African and Middle east markets overcoming the erosion in ARPU’s in India.As ARPU’s in even African region is higher than the Indian counterpart.
The merged entity would also not suffer from bludgeoning administrative cost as it is believed that it would be the 2nd best efficient Telecom operators across the world doing a business of almost US$ 1.4 million per employee.
The Indian market, adding nearly 10 million subscribers every month, is clearly tapering off. The target of 500 million telecom subscribers is estimated to be be achieved well before the target date of December 2010. Bharti Airtel through this deal wants to insulate itself from a perceived saturation point in Indian telecom market few years down the line.
The deal would allow it overcome Telecom license hurdle as new telecom licenses are difficult to be acquired in many foreign markets. The merger would also facilitate the Telco to acquire an operator with high growth potential in future.
The merger talks although has not attracted any recent competitor till yet but may see other telecom majors making a foray as even Reliance communication earlier was eagerly pursuing MTN deal. The deal at the same time may also face significant revolt in terms of regulatory and shareholder approval as it involves two major Telecom players.
MTN is a significant acquisition target for many Telecom players as it is present in many developing countries and showing an impressive revenue growth of almost 40%, even higher than Bharti Airtel.
The deal if happens will provide long term benefits to Bharti Airtel as it would be able to ride the emerging market bullishness with the help of MTN. The overall efficiency of Bharti would come in handy while managing the global behemoth operations and thus taking its India growth story forward to the whole world.
