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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