mtn final2
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BHARTI MTN DEAL
ANANTH RAJENDRAN
NITIN JUYAL
AMRIT RAO
NITESH CHUGH
NITESH BHAGCHANDANI
NITIN MUNDRA
AMIT SINGH
AMIT PATHAK
PGDM FINANCE 2009-11 IMT GHAZIABAD
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Telecom sector in India
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Features
Fast Growing Sector
200 million telephone lines
Third largest network in world behind USA andChina
Growth rate of 45%,
Average 9.5 million customers added everymonth.
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Telecom Sector In Africa
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Features
Liberalisation and Privatisation has spurred
growth in African Telecom sector.
Fastest-growing mobile market in the worldduring the past five years.
-Sub Saharan Africa grew 67% last year
compared with 10% in W. Europe.
-Nigerian mobile market growing at 100%
per year.
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Features
82 million mobile users in Africa.
Only 6 per cent of African citizens owned a
mobile phone in 2004 In Asia, North America and Europe,
conversely, mobile phone use approaches
saturation.
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Bharti Airtel Group
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Airtel Businesses
Mobile Services
Telemedia Services
Enterprise Services
Market- Leading providerofGSM services
Globally
In India
In Srilanka
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Airtel
Factsheet
Establishment
Revenue
Shares Issued
Listings
Market Capitalisation
Company analysis
Established Brand
Stakeholder Strength
Overloading of Towers
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MTN Group
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MTN Group - Introduction
South Africa-based multinational mobiletelecommunications company
Operates in 21 countries in Africa and the Middle
East President and CEO: Phuthuma Nhleko.
MTN Group recorded a 40% increase in revenueto 12.85 bn USD from 2007
Sponsor of the 2010 FIFA World Cup to be held inSouth Africa
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MTN Group - Coverage
MTN enjoys a dominant market share across itscountries of operations, being among the topoperators in most of its markets.
MTN Group divides its operations into threemajor regions:
South & East Africa (SEA)
West and Central Africa (WECA)
Middle East and North Africa (MENA)
Majority of its subscribers, revenues and profitscomes from the WECA region.
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MTN Group Subscriber base
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The Previous Affair
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Bharti-MTN deal (2008)
Bharti approached MTN in early May 2008
A proposed takeover from Bharti worth $20
bn for a 51% stake in MTN Combined entity would have been the sixth
largest mobile operator having subscribers in
25 countries
Access for Bharti to the unexplored and still
emerging African market
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Why deal couldnt get through?
MTN proposed a different deal with Bharti as
its subsidiary
Controlling stake would still have been withBharti Enterprises
Bharti was reluctant to concede control to
MTN
Would have been against Bhartis vision of a
global Indian telecom giant
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RCom takes the baton
Bhartis failure gives RCom a chance
Enters into a 45-day exclusivity agreement
RIL steps in and denies RCom the merger RIL uses first right of refusal to change the
control structure in any of ADAG companies.
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Current Deal
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Deal Structure
Step 1:
Bharti would acquire around 36% of the current
share capital of MTN
1 share of MTN = ZAR 86 + 0.5 newly issued Bharti
shares
Total Cash Value = $6.8bn
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Step 2
MTN will aquire 25% post-transaction economic
interest in Bharti Airtel
Bharti will receive 25% of the current share capital
of MTN in part settlement of above acquisition
Balance consideration will be paid out in cash of
US $2.9bn by MTN to Bharti
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Final Stake
Bharti would have 49%stake in MTN
MTN and its shareholders will have 36% stake
in Bharti Net Cash Paid = $3.9bn by Bharti to MTN
Total Deal worth = $23-26 bn
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Bharti-Airtel Equity
Dilution(shares,mn)
Current Equity Share Capital 1,898.2
Dilution to MTN Group 336.4
Additional shares to MTN Group for post-transaction 36% economic interest 731.3
Total shares post-deal 2,966.0
Dilution (%) 56.3
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Bharti + MTN - The combined entity
Particulars FY2010E FY2011E
Mobile Subscriber Base (Mn) 237.6 286.6
Revenues (US$ mn) 13,011 19,415
EBITDA (US $mn) 5,202 7,733
EBITDA Margins (%) 40.0 39.8
Net Profit (US $mn) 2,693 3,723
Existing EPS (Rs) 55.6 64.3
New EPS (Rs) 44.0 60.2 % change (20.8) (6.2)
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CHALLENGES ?
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Challenges before the deal
Arranging cash for financing the deal.
Payments for 3-G spectrum.
Shareholders concern regarding dilution ofequity.
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Managements perspective
Additional debt is not an issue as MTNs balance
sheet is strong with low debt.
Company has over US $2.1bn on its books as cash
and short term investments.
Standard chartered, SBI has shown interest in
funding the current deal.
Last year, Bharti had received expressions ofsupport from 12 bankers across the globe to raise
funds of around $60 billion to buy out MTN.
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contd
Relaxation provided under the new norms,allows MTN to pick up 36% stake in Bhartiwithout breaching the 74% FDI cap in thetelecom sector.
Window of opportunity is closing fast. Most ofemerging markets in Africa are already controlledby European players.
Deal offers substantial long term advantages
and should not be looked with short termperspective.
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ADVANTAGES OF
DEAL
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Advantages if the deal goes through
It beats the US telecom giants
Become MTNs largest shareholder
Gets access to emerging markets
Gets access to 21 nations
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MTN is active in:
Afghanistan (Investcom)
Benin (Investcom)
Botswana (Botswana Mascom)
Cameroon (MTN Cameroon)
Republic of Congo (MTN Congo SA)
Cote d'Ivoire (MTN Cote d'Ivoire)
Cyprus (MTN Cyprus)
Ghana (Investcom)MTN Ghana
Guinea Bissau (Investcom) Republic of Guinea (Investcom)
Iran (MTN Irancell)
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MTN is active in: (Cont.....)
Liberia (Investcom)
Nigeria (MTN Nigeria)
Rwanda (MTN Rwanda)
South Africa (MTN South Africa)
Sudan (Investcom)
Swaziland (MTN Swaziland)
Syria (Investcom)
Uganda (MTN Uganda)
Yemen (Investcom, Spacetel)
Zambia (MTN Zambia)
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Few Facts
The Proposed $23-26 bn deal would be the
biggest ever M&A transaction involving an
Indian company.
It would be the third largest deal in the world
in 2009 so far.
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References
Airtel.in
MTN Annual Report 2008
Wikipedia.org Angel Broking
Livemint
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Thank You
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