Bharti Airtel Limited has revived talks with the MTN Group Limited to acquire a 49 per cent sake in the South African telecom company, in a potential transaction whereby MTN and its shareholders would in turn acquire about 36 per cent stake in Bharti Airtel.

MTN would directly hold 25 per cent of the 36 per cent and the remainder by MTN shareholders, Bharti said, adding, the potential value of the cash and stock deal would be over $23 billion.

A merger of MTN, with a current market cap of $27 billion, and Bharti, valued at $34 billion, would create one of the top 10 global telecom players. This would be the largest overseas deal for an Indian company and the world's largest cross-border deal in the non-pharma sector.

According to the scheme of arrangement being discussed, MTN would acquire approximately a 25 per cent stake in Bharti for an effective consideration of approximately $2.9 billion in cash and newly issued shares of MTN equal to approximately 25 per cent of the currently issued share capital of MTN.

Bharti would acquire about 36 per cent of the newly issued share capital of MTN from MTN shareholders for a consideration comprising South African Rand 86.00 ($10.32) in cash and one half of newly issued Bharti shares in the form of global depository receipts (GDRs) for every MTN share acquired. This  combined with MTN shares issued in part settlement of MTN's acquisition of approximately a 25 per cent post-transaction economic interest in Bharti, would take Bharti's stake in the enlarged capital of MTN to 49 per cent.

Each GDR would be equivalent to one share in Bharti and would be listed on the securities exchange operated by Johannesburg Stock Exchange Limited, South Africa.

Bharti and MTN have agreed to discuss the potential transaction exclusively with one another until 31 July, Bharti Group said in a release. 

A combination of Bharti and MTN would create a leading telecommunications service provider group aligning Bharti's market lead in India with MTN's market lead in Africa and the Middle East.

Bharti would have substantial representation in the working of MTN, including its board, enabling it to fully consolidate the accounts of MTN while MTN's interest in Bharti would also reflect in its equity and 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 release said.

The potential transaction, when completed, would create value for Bharti shareholders through synergistic benefits and diversification of Bharti income streams into the fast growing and relatively under-penetrated African and Middle Eastern markets, the release noted.

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 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,'' the release said.

Bharti has nearly 100 million mobile subscribers and MTN, sub-Saharan Africa's biggest mobile operator, also has about 100 million.

''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,'' Sunil Bharti Mittal, chairman and managing director of Bharti, said.

The transaction will also 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.

Bharti said the discussions are still at an early stage and may or may not lead to any transaction. The structure and terms of the potential merger may also differ depending upon the direction and progress of discussions between the two parties and discussions with lending banks, it said. Neither the board of MTN of that of Bharti Airtel has made any decision on the merger plans, Bharti said.

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.