Bharti Airtel Ltd, India’s biggest cellphone company, and South Africa’s MTN Group Ltd reached a US$24 billion preliminary accord to buy each other’s shares, the first step in a planned merger, three people familiar with the matter said.
Bharti sweetened its bid to buy 49 percent of MTN by raising the cash portion of a US$14 billion offer, with minority shareholders having the option of receiving only cash, the people said, asking not to be named before an announcement this month.
MTN and its stockholders are set to buy 33 percent of Bharti for about US$10 billion, the people said.
BIGGEST DEAL
The world’s biggest cross-border deal this year would pave the way for the creation of a mobile-phone carrier with annual sales of US$20 billion and 200 million wireless subscribers from Johannesburg to Mumbai.
The accord would need the approval of 75 percent of MTN’s shareholders, some of whom have said Bharti should raise its offer from a bid disclosed in May.
Bharti and MTN have agreed in-principle on the commercial terms and a final accord depends on regulatory and board approvals, the people said.
SINGAPORE
Singapore Telecommunications Ltd, which owns about 30 percent of Bharti, agreed to invest as much as US$3 billion to buy Bharti shares, the people said.
Bharti may pay lenders including Citigroup Inc and Barclays Plc as much as 3.2 percentage points more than the London interbank offered rate as it seeks to borrow about US$5 billion, three people familiar with the matter said.
Bharti’s in talks with eight banks, including Barclays Plc and Citigroup Inc, to borrow between US$3 billion and US$4 billion in US dollars and in talks to borrow US$1 billion to US$1.5 billion in rupees from State Bank of India and Kotak Mahindra Bank Ltd, sources said.
‘SPECULATION’
SingTel said in an e-mail that it doesn’t comment on “market speculation.”
Marina Bidoli, a spokeswoman at Johannesburg-based MTN, declined to comment, as did Ranjana Smetacek, a Bharti spokeswoman.
In an e-mailed statement on Wednesday, Bharti said the two companies had not reached an agreement and that negotiations with MTN were still ongoing.
MTN CEO Phuthuma Nhleko has been looking to expand in markets outside the continent and said in March the company wanted to make a “meaningful” acquisition this year. The company last year failed to close deals with Bharti and its Indian rival Reliance Communications Ltd.
MARKET LEAD
The combined entity will help Bharti chairman Sunil Mittal boost overseas sales as Reliance and London-based Vodafone Group Plc close in on the company’s lead in India.
Competition is also heating up with the entry of more foreign rivals, including Japan’s NTT DoCoMo Inc and Norway’s Telenor ASA.
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