Bharti - MTN The Merger

It was a long wait. For the customers, for the corporation, for the investors, for the government, for shareholders. Patience was supposed to bear some fruit, especially since Bharti was doing everything it could to effect such a deal that would catapult it to a world level. But it was not be. Some other destiny awaits the much acclaimed Bharti brand. The success would have helped Bharti tap into the wide markets abroad in Africa, thereby leveraging the profits of the company. But regulatory structures proved a hurdle.

The deal was a complex structure, a swap of equity and cash. MTN getting 36% economic rights and Bharti owning 49% of the South African firm. It was a good proposition but the South African government's adamant stand on the dual listing capital structure proved a dent for the proposal. Some say this has proved, reason was that Bharti's shares were underperforming, atleast for the last six months. After the deal dropped this September, its shares attracted. This was so because the deal would have left a huge credit amount on its balance sheet. Indeed! Moreover, it would take time to recover that amount from the South African markets as the company would have to understand the market in those countries.

The dual listing stand of the South African government was not justified. It cannot ask the Indian legislature to modify its laws for just one corporation, however big it is. And changing the rules might mean making suitable amendments to many Acts related to it, especially the SEBI rules and the Companies Act. But maybe the Indian government might have considered looking into it, maybe even have said that they would look into the matter. One cannot give a guarantee though. After careful analysis of the effects, it could have made the changes.

But Bharti should now take a hint. To step up this thing, now it could look to smaller companies abroad, maybe even do an acquisition instead of looking for a merger. Wishing it all the best.