Bharti, MTN likely to agree on tie-up in Aug - investor

COMPETITION TOUGHENS: Bharti-MTN deal will likely see competition in the African market, where Kuwait's Zain is a major player, intensify. (Getty Images)

South Africa's top mobile operator MTN Group is likely to reach an agreement on a tie-up with Indian peer Bharti Airtel by the end of August, MTN's second-largest investor said on Tuesday.

MTN and Bharti said in May they had entered exclusive talks until July 31 about a $23 billion cash and share swap that could lead to a full merger and the creation of the world's third-largest wireless group, with more than 200 million customers and combined revenues of $20 billion.

When asked by Reuters if a deal would be reached by MTN's half-year results announcement on Aug. 27, Azmi Mikati, the chief executive of M1 Group said: "Most probably". The Lebanese Mikati family holds about 10 percent of MTN through the M1 Group.

"There are no major issues holding up the proceedings - it just takes time to finalise and address all the issues," said Mikati, who is also a non-executive member of MTN's board, according to the latest annual report.

"The transaction is complex, involving multiple jurisdictions," he noted.

Sources close to the negotiations have said that the two sides are expected to extend the Friday deadline as any deal would require regulatory approval from two governments.

It is the second time Bharti and MTN have attempted to forge a deal. If successful, a marriage between the largest mobile phone companies in two of the world's fastest-growing wireless markets would create a tough rival to key African operators such as Kuwait's Zain and Vodafone's Vodacom.

The terms of the deal might also change.

The Mikati family, which is the second largest MTN shareholder after South African state pension fund Public Investment Corporation (PIC), has openly backed the offer but some shareholders have asked for the deal to be sweetened.

However, Azmi Mikati said it was "realistic" for other MTN shareholders to ask for a 5 to 10 percent increase in terms. PIC, which has also supported the talks, has said there was "room for improvement" on the price.

The talks have centred on Bharti paying cash and shares for a 49 percent stake in MTN, while MTN pays cash and stock for an effective 36 percent in India's top wireless operator.

MTN, which runs networks in 21 markets in Africa and the Middle East, has long been viewed as a hot takeover target for foreign operators jostling for a foothold in Africa.

However, Mikati brushed aside questions about what other bidders might offer.

"I do not know what other companies might do. MTN is a unique asset and the combination with Bharti would put it in a league of its own," he said.

A successful deal would help MTN consolidate its position as the continent's biggest operator, giving it extra financial muscle for further expansion, potentially yielding cost savings and allowing for technology sharing.

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