Bharti plans new venture with SingTel to acquire MTN: report

20 May 2008

According to a report in Business Standard, Bharti Airtel and SingTel (which owns a 32-per cent stake in the Airtel's holding company, Bharti Telecom) will jointly own float a new company to act as a special purpose vehicle to acquire MTN, so as not to load Bharti Airtel's balance sheet with debt for funding the acquisition. The other shareholders of Bharti Telecom are, Vodafone with 10 per cent and Suni Mittal, who owns the remaining stake.

Singtel may be pivotal in the final structure to the valuation of MTN in the deal, which reports say could rise to as much as $50 billion including debt, from the $41 billion currently.

Quoting unnamed sources, the report says the new company will raise funds, including bridge loans and later consider selling American depository receipts or global depository receipts to repay the bridge loan. Bharti is said to be looking t $15 billion for the cash portion of the cash and share deal with MTN, while shares in the new firm would be offered to MTN shareholders for the share component.

The remiander of the cash amount will be financed through internal accruals and an issue of new shares in Bharti Airtel and Bharti Telecom, the report added.

This will also help Bahrti Airtel stay within the 74 per cent FDI limit in the telecom sector. So far, it already has an effective 68 per cent foreign ownership, leaving little scope for further FDI.

"The stake to be offered to MTN would depend on the cash-share ratio, which is yet to be finalised between Bharti and MTN. Bharti Airtel would raise funds by diluting the equity of the SPV and, if needed, the promoters' stake in Bharti and that of its partner SingTel to part-finance the deal," the newspaper said.