A potential merger being discussed by Indian telecom major Bharti Airtel and South Africa's MTN could increase the net debt of the two firms by about $6.9 billion, global rating agency Fitch said.
"Under the current terms as presented to the market, it could result in additional net debt of $4 billion at Bharti and $2.9 billion at MTN," Fitch said in its comments on the potential transaction, but noted that it would wait for finalisation of the transaction before taking any rating action on the two firms.
Fitch said that it would closely monitor developments and was taking "note of the strategic merits of a potential partnership between Bharti and MTN, as well as the positive impact on their respective business risk profiles in terms of diversification and enhanced scale."
"Nevertheless given the early stages of the discussions, potential regulatory hurdles and other associated uncertainties surrounding the transaction, Fitch will await finalisation of the transaction structure before taking any formal rating action," it added.
Bharti is one of India's leading private sector telecommunication operators with a pan-national cellular footprint, while South-Africa's MTN is one of the leading GSM operators in Africa and the Middle East with a geographic footprint across 21 countries.
Late last month, Bharti Airtel and MTN disclosed commencement of exclusive discussions to potentially acquire stakes in each other and eventually achieve a full merger.
If the discussions are successful, Bharti will own 49 per cent in MTN, and the South African telecom firm and its shareholders will own an effective 36 per cent economic interest in Bharti.
This is the second attempt by the two companies for a potential deal after their talks failed in May last year. At that time, Bharti had said that it was pulling out of the talks as MTN was proposing a deal that varied from their earlier proposed structure.
Bharti had also disagreed to MTN's proposal for making the Indian company a subsidiary of the South African company as part of the deal.
