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166 UNIVERSITY OF BOTSWANA LAW JOURNAL DECEMBER 2010 norms. 21 This was a complete ‘U’-turn by SEBI from its earlier position. In July 2009 SEBI had through an ‘informal guidance’ exempted MTN from making an open offer to Bharti Airtel shareholders. At that time, SEBI had said an open offer would be triggered only once the GDRs issued to MTN and its shareholders by Bharti Airtel were converted into local shares with voting rights. 22 This informal guidance was one of the main pillars on which the deal was being structured. This informal guidance seemed to suggest that SEBI was in favour of the deal and necessary exemptions would be granted. In fact the Securities Appellate Tribunal (SAT) even dismissed a Bharti Airtel shareholder’s appeal against the informal guidance of SEBI on open offer pertaining to the proposed Bharti Airtel-MTN deal. 23 This new amendment virtually changed the dynamics of the deal. The amendment meant that the South African company would have to pay around USD 6.6 billion (approx) as it had to buy an additional 20% stake in Bharti Airtel while making an open offer to Indian shareholders. 24 This change again changed the mechanics of the deal. This additional offer requirement made the deal less valuable to Bharti Airtel as it would mean further dilution of its stake in favour of MTN and more cash outflow for MTN. This position was unacceptable to both the parties. THE AFTERMATH The USD 23 billion deal for the merger of Bharti Airtel and MTN fell through finally on 30 September, 2009. All the issues discussed above seem to have been the deal-breaker during the tough negotiations which lasted well over a year. While announcing the calling off of the talks, Bharti Airtel expressed the hope that the South African government will review its position in the future and allow both companies an opportunity to re-engage. 25 Both the companies since then have worked on their separate strategies to achieve their respective objectives. Bharti Airtel in January 2010 announced a deal to acquire 70% stake in Bangladesh based Warid Telecom. 21 A. Bahl, ‘Sebi amends takeover code: may affect Bharti-MTN’, Live Mint, 23 September 2009, URL: http://www.livemint.com/2009/09/23003600/Sebi-amends-takeover-code-may.html (Last visited on 2 June, 2010). 22 ‘Takeover Code change to impact Bharti-MTN deal’, Business Standard, 23 September, 2009, URL: http://www.business-standard.com/india/news/takeover-code-change-to-impact-bharti-mtn-deal/21/29/ 370971/ (Last visited on 17 May, 2010). 23 R. R. Prasad, ‘SAT dismisses appeal of Bharti Airtel shareholder on open offer’, The Hindu Business Line, 29 August, 2009, URL: http://www.thehindubusinessline.com/2009/08/29/stories/ 2009082950711000.htm (Last visited on 25 May, 2010). 24 A. Datta and A. Laskar, ‘Govt backs Bharti-MTN deal, FM says’, Live Mint, 23 September 2009, URL: http://www.livemint.com/2009/09/23233726/Govt-backs-BhartiMTN-deal-FM.html (Last visited on 3 June, 2010). 25 ‘Bharti calls off $23-bn telecom deal with MTN’, Rediff Business, 30 September, 2009, URL: http:// business.rediff.com/report/2009/sep/30/tech-bharti-mtn-deal-called-off.htm (Last visited on 20 April, 2010).
AIRTEL’S AFRICAN TRYST 167 This is the largest investment in Bangladesh by an Indian company. 26 Bharti Airtel also created a foreign expansion unit to continue its ambitious expansion program. 27 Later Kuwait based telecom company Zain, accepted a USD 10.7 billion offer from Bharti Airtel for Zain’s African assets. Zain’s Africa assets include around 70 million customers. Zain’s reach is spread across Africa and the Middle East. 28 On the other hand MTN could reopen merger negotiations with Reliance Communications. The current proposal to MTN is similar to the one in 2008 when Reliance Communications had proposed to merge with MTN by swapping Anil Ambani’s 67% equity holding in the Indian cellular company with MTN shares. If the deal eventually fructifies, Reliance Communications will become a subsidiary of MTN while Anil Ambani could end up with a 20- 25% holding in MTN, making him its single-largest shareholder. 29 This would help Anil Ambani circumvent the South African stock exchange regulations as if an offer is for 35% of a company it triggers the rules whereby that buyer of the South African company must extend the offer to other shareholders. 30 It does seem that both the companies have moved on from the failed deal but certainly this deal’s exceptional potential because of the market penetration opportunities available in the African markets and the low cost model running experience of Bharti Airtel cannot be ignored. However due to the multitude of legal issues involved in both the countries coupled with the need to protect the national identity of the two corporates involved in their respective home territories, led to the downfall of an alliance which could have easily been called as a ‘match made in heavens’. 26 N. Mookerji, ‘Bharti seals Warid Telecom deal’, DNA India, 13 January, 2010, URL: http:// www.dnaindia.com/money/report_bharti-seals-warid-telecom-deal_1334087 (Last visited on 4 May, 2010). 27 ‘Bharti Airtel creates unit for foreign expansion’, The Economic Times, 13 January, 2010, URL: http:// economictimes.indiatimes.com/news/news-by-industry/telecom/Bharti-Airtel-creates-unit-for-foreignexpansion/articleshow/5440449.cms (Last visited on 22 April, 2010). 28 A. N. Ghaswalla, ‘Zain accepts Bharti offer’, The Times of India, 15 February, 2010, URL: http:// timesofindia.indiatimes.com/biz/india-business/Zain-accepts-Bharti-offer/articleshow/5574130.cms (Last visited on 19 April, 2010). 29 ‘MTN to reopen merger lines with Anil Ambani’, The Economic Times, 1 June, 2010, URL: http:// economictimes.indiatimes.com/news/news-by-industry/telecom/MTN-to-reopen-merger-lines-with-Anil- Ambani/articleshow/5996604.cms (Last visited on 2 June, 2010). 30 ‘Reliance-MTN Deal Offers an Opportunity for Private Equity’, The Wall Street Journal, 24 June, 2008, URL: http://blogs.wsj.com/deals/2008/06/24/reliance-mtn-deal-offers-an-opportunity-for-private-equity/ (Last visited on 27 May, 2010).
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