Indian telco Bharti and South African telco MTN are back in merger talks, although the deal is a little complicated in an attempt to avoid a collapse in the talks similar to what happened last year, reports TelecomAsia. Under the terms of the deal Bharti would acquire a 49 percent shareholding in MTN and, in turn, MTN and its shareholders would acquire an approximate 36 percent economic interest in Bharti, of which 25 percent would be held by MTN with the remainder held directly by MTN shareholders…longer-term goals include a full merger. The two companies have agreed to talk exclusively until July 31st and the deal is not finalized — and considering talks between them have failed before, as well as talks between MTN and another Indian telco, Reliance, there’s still a way to go before it’s signed off.
LiveMint calculated that the net cash outflow for Bharti will be around $4.1 billion, but that it “will be getting MTN at a valuation of about 5.5 times EV/Ebitda (enterprise value/earnings before interest, taxes, depreciation and amortization), which is cheap”. There are some short-term costs, but a successful merger would create a mobile telco with 200 million subscribers and $20 billion in revenue, which would put it in the top 5 telcos by number of subscribers. Also, the telco would India, much of Africa and some Middle Eastern countries, areas ripe for strong growth in the future. (Bharti release)
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