Mixed feelings on MTN-Bharti deal end

Parting of ways by Indian cellular major Bharti Airtel and South African mobile giant MTN on Tuesday after 18-month long merger talks has elicited mixed feelings among investment advisors in Johannesburg.

The announcement that the telcos had mutually agreed to end discussions on a possible merger that would have created the world's third largest mobile company did not surprise Investec Asset Management advisor Chris Stewart, who predicted it a week ago.

Vestec MD Paul Therombie, a strong supporter of the deal, however, expressed disappointment that discussions had ended.

"I think we've been vindicated seven days further on," Stewart said in a discussion on the issue here on radio.

"We were always sceptical of the deal taking place," he said, adding "getting the regulatory approvals and getting the deal structure right was only the first hurdle. The other would have been convincing MTN shareholders that the price was appropriate and that hurdle had not even been approached yet".

Stewart said in a deal of this nature, there was always a desire to compensate South African shareholders with scrip which tended to be listed offshore.

Unless one can arrange some sort of dual listing programme, than those shares typically count for an individual's offshore allowance and given exchange control regulations it's quite difficult sometimes for South African shareholders to accept those terms, said Stewart.

"This was a great deal for to get into a higher growth area like India. Looking at the statements from the South African Treasury, MTN and Bharti, it seems that everyone is going nudge-nudge; wink-wink and blaming each other. But I guess at the end of the day there were just too many hurdles to overcome."

Chiluba Mumbi of BM Inc said: "There will be some downward pressure on the (MTN share) price. In the previous round (of discussion with Bharti) the price went to around R160 per share.  The highest we've reached so far is R128 and we think it's been underpinned by this bid fever."

An application by MTN to the Johannesburg Securities Exchange to suspend trading in its shares just 20 minutes before it put out a short statement which said Bharti and MTN had agreed mutually not to proceed with the transaction also surprised analysts.