Financial Times reports that the planned merger between India’s Bharti and South Africa’s MTN could be scuppered by the South African government, which is worried about the business falling under control of a foreign entity. South African ministers have reportedly spoken out in the media against a full takeover of MTN by Bharti, suggesting instead that the pair should consider a dual listing. South African communications minister Siphiwe Nyanda said on Sunday that any deal should take into account MTN as a “South African company with a footprint in Africa.” However, a dual listing is deemed unlikely to be possible under India’s existing laws and regulations. “The [South African] government, partly for domestic political reasons and partly because the country is going through a period of economic nationalism, is putting out in the media a structure for the deal that we know won’t work,” said one person familiar with the deal.
Merger talks between Bharti and MTN are due to expire on 30 September and have already been extended twice due to the complex nature of the deal. Under the original plan, Bharti would become the biggest single stakeholder in the merged group, taking a 49 percent stake in MTN using cash and global depository receipts. Shareholders of MTN would have a 36 percent interest in Bharti through cash and stock. However, the intervention of the South Africa government has led to the fears of a repeat of last year when talks between MTN and first Bharti and later Reliance (another Indian operator) both failed because the parties were unable to agree on an ownership structure. The Financial Times notes that a similar situation is emerging during the current talks. It notes that Bharti may have to shell out more than US$7 billion in cash for a 49 percent stake in a company from which it will derive little additional cash flow and will not have control, while MTN shareholders are unlikely to support the deal until they receive more information.