Bharti-MTN: India's largest cross-border corporate merger
26 May 2009
The potential merger of India's largest GSM mobile telecom service provider Bharti Airtel Ltd and South Africa's largest telecom company MTN Group Limited highlights the attractiveness of fast-growing telecoms markets in India and Africa and reinforces India Inc.'s global ambitions undeterred by the worldwide economic slowdown.
The companies are buying international scale and growth in the world's fastest growing telecoms markets of India and Africa. This one deal worth $23 billion will almost match the value of the 280 cross-border mergers and acquisitions last year at $25 billion. It marks the grand entry of India as an acquirer in the international telecoms industry, just as previous years saw India Inc. buy into international steel, auto and IT industries.''
It shows what a catalyst a stable government with an unencumbered policy toward economic liberalisation can be. Earlier, the people of India had voted in favour of the Indian National Congress led United Progressive Alliance (UPA) in the month-long General Elections for the 15th Lok Sabha or the House of the People, for a second consecutive term, which is an affirmation of the government's economic policies of continued liberalisation and represents a vote for stability and continuity.
The merger of Bharti and MTN will be India's biggest cross border deal at almost twice the value of the acquisition of the UK's top steel maker Corus Group Plc for $12 billion by India's Tata Steel Ltd in January 2007. It also surpasses the acquisition of Hutchison Essar Ltd, India's second largest GSM mobile service provider then by the UK's Vodafone Group Plc for $11 billion, by more than a similar margin.
A winning combination
The Bharti Airtel and MTN Group combine will create a leading emerging market telecom operator with more than $60 billion in market value, revenues of about $20 billion and over 200 million subscribers. The combined entity will be amongst the top five service providers globally with operations spanning more than 23 countries in Asia, Middle East and Africa.
The new entity will enjoy better pricing power in the market, lower costs on account of shared infrastructure and resources, better purchasing power with suppliers, doubling up of subscribers to 200 million that will gradually result in more average revenue per user (ARPU) as new mobile applications and services are offered to them.