timeline of negotiations MTN-Bharti deal

Bharti Airtel and MTN called off four months of talks the day the exclusive nature of the negotiations lapsed


Tie-up talks to create a global giant in mobile communications ended in failure on Wednesday.

Bharti Airtel, India’s largest mobile operator, and MTN, Africa’s biggest telecom firm, called off four months of talks the day the exclusive nature of the negotiations lapsed. The exclusive talks had been extended twice since they started on 25 May, a year after the two phone firms gave up their first merger attempt.

Both companies are now likely to look for alternative partners.

The talks have broken down over South Africa’s insistence that the shares list on the Johannesburg stock exchange as well — a precondition that could not be met because Indian regulations did not allow it.

In May 2008, Bharti and MTN broke off discussions over the issue of control. This time the dual listing condition proved to be the deal-breaker.

Read below a timeline of negotiations since May 2008

30 Sept 2009: South Africa rejects merger; big setback to Sunil Mittal firm’s ambition of becoming global telecom force. Read story

Quick Edit
One reason to be happy

29 Sept 2009: The extended deadline for exclusivity of negotiations between the telecom groups ends 30 September.

29 Sept 2009: The deal is now believed to be in the hands of politicians, who are broadly supportive of the proposal; if it falls through, the parties may well look at other potential partners.

27 Sept 2009: India’s market regulator should play more of a proactive role than a reactive one and should address issues not using a multiplicity of regulations but with a simplified set of norms.

22 Sept 2009: Amendment of takeover rules by market regulator may determine prospects for proposed telecom deal.

21 Sept 2009: The tangle does point to a problem: Indian companies are trying to globalize at a faster pace than the underlying legal structure, such as capital controls, allows them to.

17 Sept 2009: The Bharti-MTN transaction, which would create the world’s third largest mobile group by subscribers, is subject to an end-September deadline.

16 Sept 2009: Proposed Companies Amendment Bill, Fema need to be changed; deal would also require full rupee convertibility.

Sept 14 2009: Independent Communications Authority of South Africa says it needs to be notified before the transaction is concluded. Read story

13 Sept 2009: Bharti and MTN are in exclusive talks till 30 September for a potential $23-billion deal that would create a combined entity having more than 200 million subscribers.

11 Sept 2009: Cash part up by a third to $10 billion, say sources; Overall package up by 7%; ‘Fair chance’ of getting 75% MTN s’ holder OK: HSBC.

20 August 2009: Exclusivity period extended to 30 Sep; the firms may have given themselves more time to structure the deal.

14 August 2009: Bharti Airtel will have to restructure its operations in India once it signs the deal to eventually merge with MTN so as to separate its Indian operations from the global entity.

3 August 2009: Bharti could increase its cash offer per share to make the deal more attractive.

3 August 2009: Bharti Airtel chairman Sunil Mittal’s willingness to own a lesser stake in a larger company rather than a much larger stake in a much smaller company sets him apart from several other entrepreneurs. Read story

30 July 2009: Four possible scenarios in deal for world’s third largest telecom services provider with at least 200 mn customers.

30 June 2009: The chief executive of MTN’s biggest shareholder, state pension fund Public Investment Corporation said that the fund supported the talks but there was “room for improvement” on the price.

2 June 2009: PIC CEO says supports deal in principle; room for improvement on price, expects further discussion.

26 May 2009: The Bharti Airtel-MTN merger deal is proof of the emerging market multinational, which could avoid the struggles multinationals from the US, Japan and Europe face in emerging markets.

26 May 2009: Bharti says not yet determined how to raise funds; Bharti, MTN shares fall on dilution fears; Pranab Mukherjee welcomes proposed deal.

26 May 2009: If concluded, an RCom-MTN merger — the valuations of the two firms are a combined $66 billion — would be the largest cross-border deal in Indian corporate history.

25 May 2009: Indian telco chalks out complex cash-equity $23 billion deal with African co; target: No. 3 spot in global market.

24 May 2009: Bharti Airtel has pulled out of negotiation for acquiring an estimated $45-50 billion MTN, saying the South African telecom entity deviated from agreed terms.

18 July 2008: Mutual agreement to end exclusive talks comes in face of legal and regulatory hurdles; older Ambani’s claim.

9 July 2008: RCom, MTN had first announced start of a 45-day exclusivity period on 26 May.

13 May 2008: The attempts by Bharti Airtel to reassure investors come on the heels of the company’s valuation dropping $3.33 billion between 5 May and Monday.

5 May 2008: Rival suitors may push up acquisition price; may take up to an year before any progress is made in negotiations.

Why dual listing prompted Bharti-MTN to call off deal

South Africa’s dual listing demand, which proved to be the key deal breaker for Bharti Airtel Ltd’s merger with MTN Group Ltd, didn’t just involve issues of capital account convertibility and statutory matters, but several other issues related to the existing policy framework in India.

Notable among these were concerns that the existing foreign direct investment policy framework would have been rendered infructuous as Indian authorities would not have been able to monitor sectoral caps on direct and indirect investment that are imposed on 13 industry sectors, including telecom.

In addition, entities that are ineligible for investing in Indian companies could have acquired a stake through transactions carried out on the overseas exchange, in violation of the Foreign Exchange Management Act (Fema).

Bowing to the demand for dual listing would also have weakened the Securities and Exchange Board of India’s oversight of the stock market, led to trading activity being taken away from stock exchanges in India and a likely revenue loss for the Indian exchequer.

The South African national treasury had made it clear to MTN as early as on 11 September that it would only approve the merger deal if India allowed dual listing and provided the African telecom firm remained domiciled forever in South Africa, according to people familiar with the situation. The people didn’t want to be named.

Dual listing envisages listing of shares of Indian firms, both on the domestic stock exchanges as well as on the overseas stock exchange. Thus, the equity capital of a domestic firm would partly be listed in India and partly overseas in the respective local currencies.

Existing Fema provisions do not allow Indian companies to directly list their shares on an overseas stock exchange.

The failed Bharti-MTN transaction structure envisaged that MTN’s primary listing would continue on the Johannesburg Stock Exchange, with the firm remaining domiciled and taxed in South Africa.

Key decision making posts—chairman, chief executive and chief financial officer—in the post-transaction entity would be MTN appointees for at least three years. Strong five-year standstill provisions were to apply to Bharti’s proposed 49% shareholding in MTN.

An analysis by Indian authorities concluded that it would not be possible for India to carve out a special dispensation only for dual listing, without full capital account convertibility.

Crucially, dual listing would have meant that with Indian firms raising and utilizing capital overseas without repatriation to India, the Indian government would have suffered potentially huge revenue losses. It was perhaps all this that led India to conclude that it would not be possible to carve out a special dispensation only for a dual listing without major change, a fact echoed by communications minister A. Raja in comments to reporters on Thursday.

Indian Stock Market Highest Level from may 2008

Third consecutive quarterly gain


Sensex rose 273.93 points or 1.6% to 17126.84

Nifty rose 77.10 points or 1.5% to 5083.95.

Mid Cap index rose 1%. Small Cap rose 0.9%.

BSE 500 was up 1.3%. Sensex gainers: 26

Of 13 BSE Sectoral indices, 11 posted gains.

Advancers: 1598, Decliners: 1183, Unchanged: 77

Advance/Decline ratio: 4:3

Sensex Day’s Range: 17142.52 - 16868.46

Nifty Days Range: 5087.60 - 5004.35

52-Week Range: 17142.52 - 7697.39

52-week Change: -0.1%

All Time High: 21206.77 (10 Jan 2008)

Sensex rose highest since May 21, 2008 helped by soaring foreign portfolio and logged its third consecutive quarterly gain, rising 18.2 percent in the September quarter — the longest run of quarterly gains since end 2007 and followed a 49 percent jump in the June quarter. It rose 9.3 percent in September 2009.

Sensex gainers included State Bank +5%, ICICI Bank +4.6%, Maruti Suzuki +3.7%, Sterlite Ind +3.5%, Mahindra & Mahindra +3.5% and Wipro +3.3%.

Sensex losers were: ONGC -1.3%, ITC -1.1%, Grasim -0.7% and Bharti Airtel -0.1%.

Bankex moved up 3.7% led by Axis Bank +6.1%, Oriental Bank +5%, State Bank +5%, Indian Overseas Bank +5%, ICICI Bank +4.6% and Yes Bank +4.2%.

Auto index surged 2.1% helped by Escorts +7%, Bajaj Auto +4.7%, Maruti Suzuki +3.7%, Mahindra & Mahindra +3.5% and Exide Ind +2.6%.

Capital Goods index advanced 1.7% supported by AIA Engineering +9.8% at Rs 313.25, Bharat Electronics +7.5%, Elecon Engineering +3.9%, Jyoti Structure +2.8% and BHEL +2.3%.

Metal index rose 1.6% led by Jindal Saw +5.4%, Jai Corp +3.8%, Sterlite Ind +3.5%, JSW Steel +1.6%, Hindalco +1.6% and Ispat Ind +1.5%.

Realty index climbed 1.4% aided by Parsvnath +16%, Omaxe +8.1%, Anant Raj Ind +4.5%, Orbit Corp +4.1% and Peninisula Land +3.2%.

Other sectoral movers were: IT +1.3%, Teck +1%, PSU +1%, Power +1%, Oil & Gas +0.8% and Healthcare +0.6%.

Sectoral losers were: FMCG -0.4% and Consumer Durables -0.3%.

Volume shockers on BSE:

Oil India 8.73 million shares, Karuturi 8.26 mln shares, Unitech 7.70 mln shares and Ispat Industries 7.16 mln shares

Turnover:

The market saw total turnover of Rs 82231.76 crore. This included Rs 20150.03 crore from the NSE cash segment, Rs 55412.81 crore from the NSE F&O and the balance Rs 6668.92 crore from the BSE cash segment.

Buzzers:

Cable Corp +20% at Rs 21.10, DIL +19% at Rs 288.75, Henkel India +18.2% at Rs 43.25, Maxwell India +18% at Rs 22.30, Nova Petrochem +17.3% at Rs 28.15, Central Bank +16.4% at Rs 161.20, Parsvnath +16% at Rs 144.85 and Kilitch Drugs +16% at Rs 87.

Heavy Losers:

Panasonic Engineering -7.2% at Rs 73.20, Filatex Fashion -7.1% at Rs 26.20, Ken Financial -6.7% at Rs 38.10, Spice -6.2% at Rs 173.20, Axis Capital -6.1% at Rs 33.20, NK Industries -5.9% at Rs 33.20 and Basant Agro Tech -5.7% at Rs 47.25.

New listing:

Oil India ended its first trading session at good premium of 8.1% to its issue price of Rs 1,050. The share closed at Rs 1,135 on the NSE. It touched an intraday high of Rs 1,156.70 and intraday low of Rs 1,090. On BSE it closed 1t Rs 1140.55.

Midcap Gainers:

Central Bank, Parsvnath, Dishman Pharma, Asian Star and HMT were up 10-16%.

Smallcap Gainers:

Henkel India, Paper Products, Delta Corp, Premier and KLG Systel were up 10-18%.

State Bank advances 5 pct:

Top lender State Bank of India climbed 5 percent to Rs 2,195.70, its highest close since February last year as investors expected strong corporate earnings to boost the bank’s profits.

Rel Industries rises 1.6 pct:

Energy giant heavy weight, Reliance Industries gained 1.6 percent to Rs 2,201.20 due to support from all quarters.

L & T attracts buying:

Larsen & Toubro closed 2.15 percent higher at Rs 1,683.20 after sources told Reuters on Tuesday the engineering and construction giant was readying a $600 million share sale to institutions.

Wockhardt moves to 52 week high:

Drug maker Wockhardt Ltd rose to a 52-week high of Rs 197.90 after it received tentative approval from the U.S. Food and Drug Administration for marketing tamsulosin capsules, used to treat enlargement of prostate. The stock ended 7.6 percent higher at Rs 194.60.

Asian Markets:

Asian markets ended higher. Shanghai Composite added 0.90%. Straits Times rose 0.4% or 9.3 points. Taiwan Weighted advanced 1.1%. Seoul Composite declined 1%. Hang Seng lost 0.3%.

European Markets:

European markets were quoting: FTSE 100 was +0.1 %. The CAC 40: +0.2% and the DAX was +-0.4%.

Crude:

Crude was quoting at $67.66 per barrel.

Global Positives:

Manufacturing in China grew for a sixth month, according to an index compiled by HSBC Holdings Plc. The IMF reduced its prediction for global writedowns by 15 percent to $3.4 trillion, citing improving credit markets and economic growth. U.K. consumer confidence had its biggest jump in 14 years this month, according to GfK NOP.

Optimism:

Foreign funds have moved $3.6 billion into Indian stocks so far this month, taking their yearly pickings to $11.9 billion.

Stocks rallied worldwide, with Europe’s benchmark index posting the best quarterly advance this decade, as Chinese manufacturing expanded and the International Monetary Fund cut its estimate of bank writedowns.