Bharti-MTN - “Talktime” ends

After months of discussions and intervention by respective governments, the negotiations between Indian telecom major Bharti-Airtel and South African service provider MTN has finally been called off. The issue of listing being forced by the South African authorities in a bid to retain “national identity” became the roadblock in this round of talks. It is notable that Bharti-MTN had been in discussions since May 2008 but had stopped discussion within 3 weeks of talks being initiated.

Another Indian telecom company Reliance Communications (RCom) had entered discussions with MTN at that point but failed to negotiate between may-July 2009.

Bharti-MTN restarted the fresh round of negotiations in May this year with exclusivity period understanding which was extended twice owing to internal and regulatory issues creeping up. The spoiler in this round of talks was the intervention of SA government with the issue of dual listing on Indian trading bourses. It felt that this was an effort to retain the national identity of MTN. the issue of dual listing was in direct contravention of Indian laws which currently do not approve dual listing of scripts.

In case this merger was succeeded the resulting entity would have 200 million mobile subscribers spread across 24 countries in Asia, Africa and West Asia. The merged company would have been among Top-10 global service providers.

While the shareholders and management of both firms may still take time to reflect about the possible gains and losses as a result of the deal breaking off; some banking giants engaged on the M&A talks already know the revenue loss they incurred with the deal not happening. As per estimates banks stand to lose as much as USD 50 million in fees for advisory services that they could have earned brokering this M&A.

Bank of America Merrill Lynch and Deutsche Bank are jointly set to lose an estimated USD 34 million in fees which they would have received from MTN while Standard Chartered and Barclays which advised Bharti and Goldman Sachs working for Bharti's shareholder SingTel have jointly lost USD 25 million. As a result of the failure now the banks may end up getting just a 5-10% retainer fee.

While MTN has thanked all the parties of the help they meted out Bharti accused the SA government for the latest breakdown. Bharti in a press release also said that it will keep on looking for further avenues to invest worldwide in line with its policies and principles.