BUSINESS

For Bharti, negotiations with ex-PM hold key

By Surajeet Das Gupta & Rajesh Kurup
May 09, 2008 01:55 IST

Bharti Airtel Chairman Sunil Mittal's bid for telecom major MTN Group has to contend with some tough negotiations with Lebanon's former prime minister Najib Mikati, one of the wealthiest men in his country, as well as stiff black economic empowerment policies in South Africa that provide for a major share in the management of companies located in the country to blacks.

Mikati and his brother Taha control their investments through Beirut-based M1 Group, which holds over 10 per cent in MTN and is the largest single shareholder. The brothers acquired the stake when they sold Investcom, a telecom investment arm with operations in over 11 countries, and merged the company with MTN.

Najib was prime minister of Lebanon for three months in 2005. He figured in a Forbes listing in 1998 when he was worth over $2.6 billion.

M1 Group has investments in a range of areas that include ownership of Geneva-based airline Flybaboo, a real estate company based in Monaco that recently bought upscale commercial property in Broadway, and a majority stake in Avente Petroleum in Latin America. The company also owns the US fashion label Faconnable.

Mittal also has to face stiff affirmative action laws. Banking circles said the complex rules require companies to vest at least 25 per cent of their equity and 40 to 50 per cent of the management control with blacks. There are also rules to ensure that black shareholders have enough influence to control majority shareholder decisions.

MTN has a black CEO, Phuthuma Nhleko. The Alpine Trust, through Newshelf 664, owns a 13.09 per cent stake, in MTN and Alpine owns 100 per cent of Newshelf 664. 

The beneficiaries of Alpine Trust include MTN Chief Executive Officer Phuthuma, Financial Director Rob Nisbet, and Chief Operating Officer Sifiso Dabengwa and over 2,400 MTN employees.

Bankers say that 70 per cent of the holders of the shares come from disadvantaged sections of the state.

According to an analyst, there are other challenges for Bharti Airtel. "Bharti needs to get regulatory approvals in all the 21 countries where MTN has operations. The process might be difficult, but not impossible," said Sanjay Chawla, JP Morgan's telecom analyst.

The company also has to make an open offer if it buys 35 per cent in the company under South African exchange laws.

Surajeet Das Gupta & Rajesh Kurup
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