MTN's fourth international merger plan fails
Talks to acquire some or all of Orascom break down, leaving MTN sidelined
Published: 10 June, 2010
READ MORE: M&A | Africa & Middle East | MTN | Orascom Telecom
South Africa's MTN seems doomed to be the bridesmaid at the wedding, amid the wave of consolidation among African and Asian operators. As India's Bharti Airtel - formerly in failed merger talks with MTN - celebrated the closure of its acquisition of 15 African subsidiaries from Zain, MTN's own talks with Egypt-based multinational Orascom broke down.
This was the fourth failed deal in two years for MTN CEO Phuthuma Nhleko, raising question marks over the firm's ability to sustain its pan-African lead. As rivals like Bharti, Orange and Vodafone snap up the cream of the continent's cellcos, targets are getting rarer and prices higher, threatening to leave MTN in the cold. It leads a South African market that is the second largest in Africa, but saturating, and has activities in 20 other MEA countries, but often lacks a lead position.
MTN said it had ended talks with Orascom's holding company, Weather Investments, to buy $10bn of assets of the telco, which has operations in the Middle East, Africa and Mediterranean. The purchase of the Middle East's largest mobile operator by subscribers would have brought MTN new presence in the MEA region and outlets in Bangladesh, Pakistan and North Korea. It gave no reasons but one stumbling block was a block by the Algerian government on the sale of Orascom's largest and most profitable unit, Djezzy.
"With the list of failed deals growing, investors are likely to remain concerned that the company may be keen to do a deal at almost any price," Martin Mabbutt of Nomura Securities told BusinessWeek. MTN needs new growth areas, having suffered a fall in full year profit for fiscal 2009 and an erosion of its South African base, down by 6.4% to 16.1m in the face of new regulations and competition from Vodacom.
Last year, MTN failed for the second time to conclude a merger with Bharti, which would have been valued at about $23bn and created the world's third largest mobile subscriber base. Another Indian alliance attempt, with Reliance, ended in July 2008 - Reliance is now said to be in talks with various suitors, possibly including AT&T and Etisalat.
This week, Bharti completed its $9bn acquisition of the sub-Saharan African assets of Kuwait's MTC/Zain.
Orascom Telecom operates in Algeria, North Korea, Bangladesh, Pakistan, Egypt, Tunisia, the Central African Republic, Burundi, Namibia and Zimbabwe. It has a complex and often disputed relationship with Orange in Egypt, which was recently settled.
Meanwhile, Bharti faces its own disputes over its Zain deal. South Africa's Econet Wireless says its dispute over ownership of Zain Nigeria has yet to be resolved despite the closure of the deal. Econet owns a 5% stake in Zain Nigeria, and claims that Zain ignored its right of first refusal over the sale of its African assets to Bharti. Zain Nigeria is the largest single business unit among the 15 networks included in the deal, and will become Bharti's single largest subsidiary outside India, accounting for about 35% of its international connections base.
More M&A News
More AFRICA & MIDDLE EAST News
More MTN News
COMMENTS
Carrier Broadband Performance: Africa & Middle East
Carriers are using mobile broadband as their weapon of choice in the fight against the commoditization of voice and falling ARPU. This...
Voice over LTE: Market Analysis and Forecasts
VoLTE offer unique advantages in lowering a carrier's voice infrastructure economics and promises to improve voice quality, device...
Satellite Phones: Will Dual Mode Help the Phoenix Rise from the Ashes?
Satellite phones have followed an arduous path since their much-hyped launch more than a decade ago. The hype was followed by an e...
