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LONDON, UK: Bharti and MTN announced that the proposed $24 billion deal to merge the two companies has fallen apart, four months after restarting negotiations. This is the second time negotiations have failed, after an unsuccessful attempt to merge last year.
This time the South African government failed to give its blessing to the proposed deal structure. In Bharti’s words, “this structure needed an approval from the government of South Africa, which has expressed its inability to accept it in the current form.” Angel Dobardziev, Practice Leader, based in London comments:
A political decision overriding compelling strategic reasons
There were always lots of things that could go wrong with this proposed deal. In the end it seems to have been derailed by political decisions rather than issues of price and/or management control. The South African government was keen not to be seen as ceding control to one of its key national champions.
In order to maintain MTN’s South African identity and to provide cover for potential accusations of ‘selling off’, the South African government required the future entity to have dual listing on both the South African and Indian bourses. Indian law does not currently allow dual listing, and the Indian government was apparently unwilling to make changes to its laws to accommodate this.
After two extensions to the current negotiations, this was the final blow. Bharti was careful to leave the door open for restarting negotiations in the future, although having failed twice it is hard to see this deal being resurrected again.
We maintain that this deal was a good fit strategically and operationally, over and above the issues of economies of scale and complementary footprints. MTN’s strong retail mindset and experience from over 20 different African and Middle Eastern markets would have been a good complement to Bharti’s strong operational experience in network and IT outsourcing, and infrastructure sharing.
For example, MTN was one of the first telcos globally to successfully introduce dynamic mobile pricing and Bharti was one of the first telcos to outsource its IT to IBM on a revenue-sharing model (which has since been replicated by many other telcos) and has recently followed that with a network outsourcing deal with Alcatel-Lucent. For now, all of this remains an academic consideration.
Emerging market consolidation will accelerate
It is interesting to contrast the position of the South African government with that of the Kuwaiti government, which for some time has been keen to sell Zain, either as a whole or in parts.
Leaving aside political considerations, from an investment perspective right now may be a good time to sell an attractive emerging market player. The financial markets are opening up and many stock market valuations have rebounded strongly. There remains a massive interest in emerging market companies as mature market growth has slowed down to a trickle.
Emerging market subscriber and revenue growth is still in strong double-digit numbers, and the leading players have attractive margins. In addition, smart financial investors are looking to cash in their chips while things are still looking good.
However, over the next few years’ competition in many emerging markets is set to rapidly increase due to the entry of new players in the markets and slower subscriber growth as the quality (i.e. higher-spending) market segments start to saturate. This will lead to a slowdown in subscriber and revenue growth, and ARPU and profit margins will decline as a result.
Bharti is a prime example of all of these factors at play in the intensely competitive Indian market –- hence its drive for an ambitious M&A deal in search of growth and diversification.
Other emerging market players such as Reliance, Etisalat, Batelco, Qtel and STC, not to mention Vodafone and Orange, remain on the lookout for M&A targets, so further consolidation and increased M&A activity from strategic investors in the emerging markets will be the norm in the coming year.
Showing posts with label South Africa. Show all posts
Showing posts with label South Africa. Show all posts
Friday, October 2, 2009
Tuesday, September 8, 2009
Tata Communications Transformation Services (TCTS) starts management of SEACOM cable system
MUMBAI, INDIA: Tata Communications Transformation Services Ltd (TCTS), a leading provider of business transformation, telecom BPO and consultancy services, announced that it has launched NOC operations, subsequent to SEACOM commissioning the 1.28 Terabytes per second (Tb/s), 17,000-kilometre cable system.
TCTS NOC has started managing the network administration, operations and maintenance functions of this SEACOM cable system which connects the African continent to the rest of the world.
Leveraging its parent company's (Tata Communications) expertise in the sub-sea domain, TCTS will help SEACOM enhance connectivity for businesses based out of Europe, Asia and India by providing them with cable and capacity options into Africa and vice versa; an option never available before.
SEACOM will ensure a robust fulfillment and assurance experience to its customers through TCTS' offshore global delivery centres, which provide cost-effective 24X7 service delivery to customers across the world.
The SEACOM cable system enables Tata Communications to provide fully integrated network services from South Africa, Mozambique, Tanzania and Kenya to its networks in Europe, Asia and India.
Besides high capacity international bandwidth, enterprises and carriers using SEACOM can enjoy delay-free voice and video services made possible by reduced Round Trip Delay (RTD).
"We are proud to be associated with the SEACOM cable project that will bring much needed connectivity into Africa. With our expertise in managing operations of submarine and terrestrial networks, we can bring process efficiencies to SEACOM and as a result transform the businesses and lives of the local people," said V.S. Shridhar, COO of TCTS.
The launch of SEACOM augments the SAT3 and SAFE cables in West Africa and South Africa. This gives telcos in Africa the ability to provide a fully redundant service by supplying access via two routes to anywhere in the world, and can reach Europe, for the first time, via multiple routes.
"Before the development of this cable system, most east and southern African nations relied on small and costly satellite circuits to meet their international network requirements," said Brian Herlihy, SEACOM CEO.
"SEACOM's establishment marks the first step in meeting the region's fast rising demand for bandwidth and connectivity and we expect many more services to be rolled out as a result of SEACOM's arrival. Businesses using the SEACOM network will truly benefit from TCTS' expertise in managing all business and network operations as well as the leverage offered through the broader Tata Communications group of businesses."
TCTS NOC has started managing the network administration, operations and maintenance functions of this SEACOM cable system which connects the African continent to the rest of the world.
Leveraging its parent company's (Tata Communications) expertise in the sub-sea domain, TCTS will help SEACOM enhance connectivity for businesses based out of Europe, Asia and India by providing them with cable and capacity options into Africa and vice versa; an option never available before.
SEACOM will ensure a robust fulfillment and assurance experience to its customers through TCTS' offshore global delivery centres, which provide cost-effective 24X7 service delivery to customers across the world.
The SEACOM cable system enables Tata Communications to provide fully integrated network services from South Africa, Mozambique, Tanzania and Kenya to its networks in Europe, Asia and India.
Besides high capacity international bandwidth, enterprises and carriers using SEACOM can enjoy delay-free voice and video services made possible by reduced Round Trip Delay (RTD).
"We are proud to be associated with the SEACOM cable project that will bring much needed connectivity into Africa. With our expertise in managing operations of submarine and terrestrial networks, we can bring process efficiencies to SEACOM and as a result transform the businesses and lives of the local people," said V.S. Shridhar, COO of TCTS.
The launch of SEACOM augments the SAT3 and SAFE cables in West Africa and South Africa. This gives telcos in Africa the ability to provide a fully redundant service by supplying access via two routes to anywhere in the world, and can reach Europe, for the first time, via multiple routes.
"Before the development of this cable system, most east and southern African nations relied on small and costly satellite circuits to meet their international network requirements," said Brian Herlihy, SEACOM CEO.
"SEACOM's establishment marks the first step in meeting the region's fast rising demand for bandwidth and connectivity and we expect many more services to be rolled out as a result of SEACOM's arrival. Businesses using the SEACOM network will truly benefit from TCTS' expertise in managing all business and network operations as well as the leverage offered through the broader Tata Communications group of businesses."
Monday, May 25, 2009
Bharti Airtel renews MTN partnership efforts
NEW DELHI, INDIA: Bharti Airtel Ltd announced that it has renewed its effort for a significant partnership with MTN Group Ltd (“MTN”) and is exploring a potential transaction whereby, pursuant to a scheme of arrangement, Bharti would acquire a 49 percent shareholding in MTN and, in turn, MTN and its shareholders would acquire an approximate 36 percent economic interest in Bharti, of which 25 percent would be held by MTN with the remainder held directly by MTN shareholders. Bharti and MTN have agreed to discuss the potential transaction exclusively with one another until July 31, 2009.
The potential transaction between Bharti and MTN would create a leading telecom service provider group aligning Bharti’s market leading Indian business with MTN’s market leading African and Middle Eastern operations.
The broader strategic objective would be to achieve a full merger of MTN and Bharti as soon as it is practicable to create a leading emerging market telecom operator which today would have combined revenues of over $20 billion and a combined customer base of over 200 million.
Sunil Bharti Mittal, Chairman and Managing Director of Bharti, said: “We are delighted at the prospect of developing a partnership with MTN to create an emerging market telecom powerhouse. Both companies would stand to gain significant benefits from sharing each other’s best practices in addition to savings emanating from enhanced scale. We see real power in the combination and we will work hard to unleash it for all our shareholders. This opportunity also represents a first of its kind in developing an Indian-African initiative that would serve as a shining example of South-South cooperation.”
The discussions contemplate that the potential transaction, which would be achieved through a scheme of arrangement, would include the following principal elements:
• MTN would acquire approximately a 25 percent post-transaction economic interest in Bharti for an effective consideration of approximately $2.9 billion in cash and newly issued shares of MTN equal to approximately 25 percent of the currently issued share capital of MTN.
• Bharti would acquire approximately 36 percent of the currently issued share capital of MTN from MTN shareholders for a consideration comprising ZAR 86.00 in cash and 0.5 newly issued Bharti shares in the form of Global Depository Receipts (GDRs) for every MTN share acquired which, in combination with MTN shares issued in part settlement of MTN’s acquisition of approximately a 25 percent post-transaction economic interest in Bharti, would take Bharti’s stake to 49 percent of the enlarged capital of MTN. Each GDR would be equivalent to one share in Bharti and would be listed on the securities exchange operated by JSE Limited, South Africa.
• Bharti would have substantial participatory and governance rights in MTN enabling it to fully consolidate the accounts of MTN.
• MTN's economic interest in Bharti would be equity accounted and would have appropriate representation on the Bharti Board.
Singapore Telecommunications, a major existing shareholder of Bharti, will continue to be a strategic partner and significant shareholder after the implementation of the potential transaction.
The potential transaction, when completed, would be expected to create value for Bharti shareholders due to, among others, synergistic benefits and further diversification of Bharti income streams into the fast growing and relatively under-penetrated African and Middle Eastern markets.
This potential transaction would combine the strengths of two leading emerging market telecom operators to create a leading telecom group serving the large populations of Asia, Middle East and Africa. The potential transaction will represent a significant development in South-South cooperation between India and South Africa. Additionally, along with Bharti’s partner, Singapore Telecommunications, and its Bridge Alliance the combined networks will cover a geography spanning Africa to Australasia.
Bharti would be the primary vehicle for both Bharti and MTN to pursue further expansion in India and Asia while MTN would be the primary vehicle for both Bharti and MTN to pursue further expansion in Africa and the Middle East.
The discussions are at an early stage and may or may not lead to any transaction. The structure and terms of the potential transaction may be adjusted to reflect further discussions between the parties and discussions with lending banks and applicable regulators. No decisions or agreement to acquire any shares or implement the transactions outlined above have been made by the Boards of either MTN or Bharti.
Standard Chartered Bank and its affiliate First Africa SA (Pty) Ltd are the financial advisers and AZB & Partners and Bowman Gilfillan are the legal advisers to Bharti.
The potential transaction between Bharti and MTN would create a leading telecom service provider group aligning Bharti’s market leading Indian business with MTN’s market leading African and Middle Eastern operations.
The broader strategic objective would be to achieve a full merger of MTN and Bharti as soon as it is practicable to create a leading emerging market telecom operator which today would have combined revenues of over $20 billion and a combined customer base of over 200 million.
Sunil Bharti Mittal, Chairman and Managing Director of Bharti, said: “We are delighted at the prospect of developing a partnership with MTN to create an emerging market telecom powerhouse. Both companies would stand to gain significant benefits from sharing each other’s best practices in addition to savings emanating from enhanced scale. We see real power in the combination and we will work hard to unleash it for all our shareholders. This opportunity also represents a first of its kind in developing an Indian-African initiative that would serve as a shining example of South-South cooperation.”
The discussions contemplate that the potential transaction, which would be achieved through a scheme of arrangement, would include the following principal elements:
• MTN would acquire approximately a 25 percent post-transaction economic interest in Bharti for an effective consideration of approximately $2.9 billion in cash and newly issued shares of MTN equal to approximately 25 percent of the currently issued share capital of MTN.
• Bharti would acquire approximately 36 percent of the currently issued share capital of MTN from MTN shareholders for a consideration comprising ZAR 86.00 in cash and 0.5 newly issued Bharti shares in the form of Global Depository Receipts (GDRs) for every MTN share acquired which, in combination with MTN shares issued in part settlement of MTN’s acquisition of approximately a 25 percent post-transaction economic interest in Bharti, would take Bharti’s stake to 49 percent of the enlarged capital of MTN. Each GDR would be equivalent to one share in Bharti and would be listed on the securities exchange operated by JSE Limited, South Africa.
• Bharti would have substantial participatory and governance rights in MTN enabling it to fully consolidate the accounts of MTN.
• MTN's economic interest in Bharti would be equity accounted and would have appropriate representation on the Bharti Board.
Singapore Telecommunications, a major existing shareholder of Bharti, will continue to be a strategic partner and significant shareholder after the implementation of the potential transaction.
The potential transaction, when completed, would be expected to create value for Bharti shareholders due to, among others, synergistic benefits and further diversification of Bharti income streams into the fast growing and relatively under-penetrated African and Middle Eastern markets.
This potential transaction would combine the strengths of two leading emerging market telecom operators to create a leading telecom group serving the large populations of Asia, Middle East and Africa. The potential transaction will represent a significant development in South-South cooperation between India and South Africa. Additionally, along with Bharti’s partner, Singapore Telecommunications, and its Bridge Alliance the combined networks will cover a geography spanning Africa to Australasia.
Bharti would be the primary vehicle for both Bharti and MTN to pursue further expansion in India and Asia while MTN would be the primary vehicle for both Bharti and MTN to pursue further expansion in Africa and the Middle East.
The discussions are at an early stage and may or may not lead to any transaction. The structure and terms of the potential transaction may be adjusted to reflect further discussions between the parties and discussions with lending banks and applicable regulators. No decisions or agreement to acquire any shares or implement the transactions outlined above have been made by the Boards of either MTN or Bharti.
Standard Chartered Bank and its affiliate First Africa SA (Pty) Ltd are the financial advisers and AZB & Partners and Bowman Gilfillan are the legal advisers to Bharti.
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