Merger talks between India’s Bharti and South Africa’s MTN could be extended for a second time amid reports that MTN’s shareholders are becoming increasingly frustrated with the negotiations. According to the Wall Street Journal today, which cites people familiar with the situation, MTN’s shareholders are looking for Bharti to sweeten its side of the deal and some are now asking for an additional roughly US$1 billion from the Indian operator. “The level of irritation rises as this drags on,” said Anthony Sedgwick, investment manager at Polaris Capital in Cape Town, which has a stake of about 1.5 percent in MTN. “There has been no communication regarding the rationale… why this deal apparently has to be pursued at all costs.” MTN would need the approval of investors holding at least 75 percent of its shares for a deal to go through, the report says. The two parties have already extended an exclusive period for negotiations by one month to 31 August and sources suggest that a second extension is likely. “It is unlikely that there will be an agreement by the end of August,” said a source. 

According to the original merger plans, Bharti will acquire a 49 percent shareholding in MTN, while MTN and its shareholders would acquire an approximate 36 percent stake in Bharti, of which 25 percent would be held by MTN with the remainder held directly by its shareholders. The main stumbling block appears to be the price Bharti will pay for its stake in MTN. Reports last week suggested that Bharti has increased its offer for its stake in MTN by as much as 10 percent above what was originally planned. However, as we reported yesterday, Bharti has had substantial interest from banks willing to fund its side of the deal.