Merger talks delay MTN issue
BEE share sale mooted for next year
August 28, 2009
By Thabiso Mochiko
MTN'S plans to sell black economic empowerment (BEE) shares to the public have been sidetracked by discussions with India's Bharti Airtel over a possible merger and the recent market downturn.
MTN intends to sell a stake of about 6 percent to black investors to replace staff empowerment group Newsshelf, whose term ended in December. But the plans were halted early this year by the market downturn, which would have made it difficult to raise funds.
"The discussions with Bharti delayed the BEE transactions, but we are committed to do it and will be focusing on it in the next coming months," chief executive Phuthuma Nhleko said yesterday.
But he said that by the first quarter of next year "we will have made progress". Nhleko would not divulge the structure of the transaction or whether the shares would be increased.
In May, MTN entered into exclusive talks with Bharti that could see MTN and its shareholders buy 36 percent of India's largest cellular operators. Bharti plans to buy 49 percent of MTN in a deal that could create an entity with annual revenue of more than $20 billion (R157bn) and 200 million subscribers. The Wall Street Journal reported yesterday that Bharti was offering $13.1bn in cash and stock for the stake.
Nhleko said the group would like to finalise the talks as quickly as possible to remove shareholder uncertainty.
The companies aimed to benefit from "economies of scale" that might come from the merger. He said MTN would remain listed on the JSE.
Lindsey McDonald, Frost & Sullivan's senior telecommunications analyst, said: "The cost-saving synergies are apparent in terms of the operational and reporting processes and this is likely where both companies are to gain experience. We don't expect a rebranding exercise."
MTN, which operates in 21 countries including Nigeria, Iran, Syria and Afghanistan, yesterday posted a 30.6 percent growth in interim profit after tax to R9bn. Subscribers rose 14 percent to 103.2m.
New subscribers in South Africa increased only 62 000 to 17.2m. MTN Iran's subscribers are now higher than South Africa's at 19.2m and a further 6m are expected by December.
MTN blamed the disappointing performance in South Africa on the network and supporting systems, and pressure on consumer spend.
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