Bharti Airtel might be open to offering the chairman's post of the new merged entity to MTN group chairman M C Ramaphosa. Sunil Mittal would be deputy chairman and group CEO and MTN group CEO Phutomo Nhleko deputy group CEO, according to bankers close to the negotiations.
While a 'non-binding', 'non-definitive' and 'non-disclosure' agreement between MTN and Bharti Airtel is expected to be signed soon, there are key issues on foreign direct investment limits within India that might need to be addressed to complete the financial structuring of the company.
India does not allow more than 74 per cent direct foreign equity in a telecom company and Bharti already has Singtel with a direct and indirect stake of over 13 per cent directly (and over 30 per cent indirectly) apart from other foreign institutional investors.
With MTN raising its asking price, bankers said Bharti will have to pay for 50 per cent of the deal through cash and the rest through equity in Bharti Airtel. This means the foreign shareholding in the merged entity might go up substantially.
Bharti's initial proposal was for a 60:40 cash and share deal.
The South African telco, which operates in 21 countries, has a valuation of $45 billion to $50 billion (including a premium since its market cap is around $36 billion).
Ramaphosa is expected to meet regulators in South Africa and the Black Economic Empowerment Council, which has been pushing for a greater role for blacks in companies in the country, to explain the nature of the deal.
MTN's management, most of whom are part of the black community, holds over 13.3 per cent in the company through Newshelf664. The Mikati family of Lebanon holds a 9.8 per cent stake and has already supported the negotiations with Bharti.
Some bankers associated with deals in the South Africa region also point out that the Office of Foreign Assets Control, which is part of the Treasury department in the US, has imposed comprehensive sanctions in markets of some of the countries in which MTN operates, like Iran, Liberia and Syria, which might make it difficult for US bankers to fund the deal.
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