Bharti, MTN may retain current management structures

Thomas K. Thomas on The Hindu Business Line on 26 May 2009

New Delhi, May 25 To avoid any conflict over control of the merged entity, Bharti and MTN are likely to retain their existing management structures to run the operations in the respective regions.

A Bharti Airtel spokesperson told Business Line: “It is anticipated that existing management will continue to serve at both MTN and Bharti. We have enormous respect for the current management of MTN and of course our management team. The two management teams have independently managed to create significant leadership teams. Moreover, mechanisms would be put in place to share best practices across the two teams.”

Last year, talks between the two companies had fallen through due to a disagreement over the holding structure. Bharti had said the structure proposed by MTN would not capture the synergies of a combined entity and was a convoluted way of getting an indirect control of the combined entity compromising the minority shareholders of Bharti Airtel.

Sources close to the now-developing deal said Mr Manoj Kohli, CEO of Bharti Group, could be chosen to lead the merged entity given that the Indian operations are being managed by Mr Sanjay Kapoor, Deputy CEO, and Mr Atul Bindal, President of Bharti’s mobile business.

Once the merger is completed, Bharti would be the largest shareholder in MTN. Bharti Telecom, the holding company of Bharti Airtel, will continue to be the largest shareholder in Bharti Airtel and together with MTN and SingTel shall have a majority economic interest in the company.

Further, Bharti’s investor base would be widened by existing MTN shareholders holding a direct economic interest through the Global Depository Receipts proposed to be listed on Johannesburg Stock Exchange.

The deal would enable Bharti expand its operations beyond India in a big way. Mr Madhusudan Gupta, senior research analyst, says: “The current hyper growth in the Indian wireless space is expected to normalise over the next few years after which Indian telecom companies would look at other under-penetrated markets. Africa is one such region where the market dynamics is similar to India in terms rural population and a low-cost business model. Bharti has done it in India and, therefore, it would look to replicate its success in Africa.”

Singapore Telecommunications, which holds 30 per cent stake in Bharti, will continue to be a strategic partner after the implementation of the potential transaction. Both companies said the discussions are at an early stage and may or may not lead to any transaction. Standard Chartered Bank and its affiliate First Africa SA (Pty) Ltd are the financial advisers and AZB & Partners and Bowman Gilfillan the legal advisers to Bharti.