Talks between mobile giants Bharti Airtel of India and South Africa’s MTN have stalled at the last hurdle, for the second time in a year.
Bharti is said to be still eager to tap into growth opportunities in Africa and the Middle East (where MTN operates in 21 markets), however it will now have to find another avenue for its entry into Africa.
Informa Telecoms and Media principal analyst Nick Jotischky said:
“Ultimately this is disappointing for both groups involved. MTN had hoped to gain a foothold in the Indian market through this deal as well as benefit first-hand from Bharti Airtel’s successful low-cost operating models deployed in India.
“Meanwhile, Bharti Airtel is keen to diversify away from its domestic market and join the ranks of Vodafone and America Movil, and push to become the largest emerging markets specialist group.
“The failure of the deal shows the difficulties attached in creating a super-group as the merged Bharti-MTN entity would have been. Despite the efforts at the highest level with both the Indian and South African government involved in the talks, ultimately neither company nor government was prepared to compromise over the structure of this acquisition. Integration of these two groups would have been hugely challenging from an organisational, operational and cultural standpoint.”
Informa has argued that had the deal gone through, the Indian company would have attempted to export its low-cost model, which has been so successful in operating profitably from an average US$5-6 ARPU, and in doing so, would have provided a shake-up of the African competitive landscape.
Whilst a statement from Bharti Airtel suggests that there could be an opportunity for re-engagement between the two companies, Jotischky said this was unlikely.
“Perhaps more likely is the possibility of Bharti Airtel or rival operator Reliance entering discussions with Zain, which has operations in 15 sub-Saharan African markets,” he said.
Had the creation of the Bharti-MTN group occurred, it would have become the world’s fourth largest operating group with over 180 million subscriptions. Instead Bharti Airtel will remain the world’s eighth largest telecoms group with just over 100 million subscriptions, ahead of MTN ranked 13th with approximately 80 million subscriptions.