MTN deal 'requires cabinet stamp'
Lack of BEE 'is of concern'
September 15, 2009
By Reuters and Thabiso Mochiko
The proposed tie-up between MTN and India's Bharti Airtel needed cabinet approval, a senior government official said yesterday as the deal entered a critical week.
The statement came as a team from the Indian firm met stakeholders in South Africa, according to a source who said it was possible that the talks could extend a few days past a September 30 deadline.
It also emerged yesterday that the issue of black empowerment shareholding at MTN is one of the concerns for the government. The official said black economic empowerment was getting a "raw end of the stick" through this type of transaction.
Bharti recently sweetened terms to mollify MTN shareholders. A top South African treasury official said the government was in talks with Indian authorities.
"As far as we are concerned we would like to promote South-South relations. The relationship between South Africa and India is a very important relationship.
"The decision will be taken by the executive... a transaction of this magnitude is not a decision you just take on your own," Treasury director-general Lesetja Kganyago told journalists.
The government official said: "What we are saying is that we don't want black empowerment being compromised.
"There must be consideration of people on the ground. If those things are not addressed, the deal might not get government blessing. Black empowerment is one of the government's policies that should be adhered to."
MTN has very little formal BEE shareholding after management- and staff-owned Newshelf was unwounded in December. It had planned to sell a 6 percent stake to the black public by March this year but those plans took a back seat because of the negative market conditions and the talks with Bharti.
It has shareholding by black investors who bought shares via the National Empowerment Fund's Asonge scheme, but this represents less than 1 percent of its share capital.
MTN chief executive Phuthuma Nhleko, said last month that the group planned to finalise the BEE shareholding transaction early next year.
Tiyani Rikhotso, the spokesperson of Communications Minister Siphiwe Nyanda, would not want to comment on the issue of BEE. However, he reiterated that the government would take into account the interest of the country if and when MTN provided more information regarding the proposed merger with Bharti.
The deal, which will involve a change in ownership, also faces regulatory scrutiny. The Independent Communications Authority of SA (Icasa) said that the transaction could be subjected to a public hearing before it was approved.
Jan Meintjes, a portfolio manager at Gryphon Asset Management, said although the government was not a direct shareholder in MTN, there were various areas where it was able to influence transactions, such as through regulatory bodies and in issues such as foreign exchange, and also competition.
He noted that although some regulatory bodies were independent, they would have to take government policies into account in their rulings.
"It is common practice to lobby government and it will be very difficult for parties to go on a roadshow without some form of approval from government. Without that blessing or approval it creates a lot of uncertainty," he said.
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