South African state pension fund seeks higher price for Bharti merger

03 June 2009

South Africa's state pension fund Public Investment Corporation, which is mobile group MTN's biggest shareholder, said on Tuesday that it supports revived merger talks with India's Bharti Airtel in principle, but believes there is "room for improvement" on the price.

PIC has also said it was undecided on whether to vote for the initial proposed $23-billion cash and share swap with Bharti, thereby putting pressure on the latter to sweeten its offer.

Brian Molefe, chief executive of PIC, told the western media, "Because of the strategic imperative, yes we will support the deal, but it depends on how they are going to negotiate, how the final details are going to look." These were Molefe's first public comments since talks restarted.

MTN, Africa's biggest mobile operator and Bharti, India's leading cellular firm, said last week they had restarted talks aimed at creating the world's third largest wireless group with more than 200 million subscribers and combined revenues of $20 billion.

They are discussing a swap deal that would leave Bharti with 49 per cent of MTN, while the South African company and its shareholders would get 36 per cent of Bharti. That could lead to a full merger of the companies, which have a combined market value of about $60 billion.

PIC holds about 21 per cent of MTN after a recent black economic empowerment deal, so winning its support will be crucial for the companies. Several smaller MTN investors have said Bharti needs to sweeten its offer, although Lebanon's Mikati family - which holds about 10 per cent - has already supported the transaction.