Icasa's MTN feud turns rand down
September 22, 2009
By Ethel Hazelhurst
Doubts raised by regulatory authorities over the MTN-Bharti Airtel deal helped put the rand's recent dramatic rise on hold yesterday.
At 5pm the currency was bid at R7.467 to the dollar, 5.2c weaker than on Friday, as it gave up the gains made over the previous 10 days.
The deal will see local cellular operator MTN take a 36 percent stake in Indian counterpart Bharti, and Bharti 49 percent of MTN. South Africa represents only about 20 percent of MTN's earnings and the company operates in 21 countries, where it owns 60 percent or more of the operations.
Officials from the National Treasury and the Reserve Bank are in India today to discuss regulatory issues around the transaction with the Indian Finance Ministry and the Indian central bank, according to Treasury spokeswoman Thoraya Pandy.
Pandy said that the Treasury had "received an application from MTN for an exemption on a range of exchange control regulations, and due process is being followed".
Communications Minister Siphiwe Nyanda and the Independent Communications Authority of SA (Icasa) have expressed reservations about the transaction, which would create a combined operation with 200 million subscribers in 23 countries. The deal might need public hearings and cabinet approval. And trade unions, which failed to stop the sale of 15 percent of Vodacom shares to UK giant Vodafone, are preparing to act.
Mike Schussler, the chief executive at Economists.co.za, said South Africa should not be over-confident about its ability to attract foreign direct investment (FDI).
"We may not find it so easy if we are going to create obstacles to foreign deals." Schussler argued the deal has benefits for both parties - and therefore spin-offs for both countries.
The Treasury agrees. "There are excellent possibilities for synergy, which also offers knowledge-sharing, new technological capacity and leveraging, which will enable both countries to benefit," Pandy said. "We are profoundly committed to South-South relations."
Ian Cruickshanks, head of strategic research at Nedbank Capital, said if South Africa pulled out of the deal, leaving Bharti in the lurch, "it could make South Africa appear an unreliable partner and diminish opportunities to attract foreign capital in the future".
Foreign investment has funded South Africa's growth over the past few years, when the country ran a massive deficit on its current account - the gap between revenue from exports of goods and services and the import bill.
And its most stable component is FDI. In the second quarter, FDI more than doubled to R23.9 billion, mainly due to the Vodafone acquisition. Expectations about the latest deal had helped buoy the rand over recent weeks, said Cruickshanks.
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