News APP

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  gplay

Rediff.com  » Business » Bharti-MTN deal up against affirmative action policy

Bharti-MTN deal up against affirmative action policy

September 15, 2009 04:16 IST
Get Rediff News in your Inbox:

The South African government is tightening the screws on the proposed $23 billion share-swap deal between its telecom major MTN and Bharti Airtel, Indian's largest telecom company, by making it clear that the company has to retain its character as a South African company. 

Bloomberg quoted Tiyani Rikhotso, a spokesman for Communications Minister Siphiwe Nyanda, as saying, "We obviously value MTN as a South African company; we want it to retain that character."

The government's position brings to the fore complex Black economic empowerment policies. Private companies must apply the Black empowerment codes if they want to do business with any government enterprise or organ of state -- that is, to tender for business, apply for licences and concessions, enter public-private partnerships, or buy state-owned assets.

The spokesperson also made it clear that though the government would not interfere with the talks, the negotiations must consider issues of ownership and management, including the positions of chief executive officer and chairman.

Rikhotso added that  MTN has benefited from trade and bilateral agreements negotiated by South Africa's government, which allowed the Johannesburg-based company to expand on the continent and into West Asia.

A similar view was also repeated by other top government officials. "All the minister is concerned with is whether the deal is in the interests of South Africa," Deputy Finance Minister Nhlanhla Nene said in an interview to Bloomberg in Kleinmond, about 100 kilometers east of Cape Town today. "We haven't sat at a ministerial level" to take a decision, he added.

Public Investment Corp, the South African government pension fund administrator, owns 24 per cent of MTN and had raised several concerns about the tie-up, according to Nene, who is also the PIC's chairman.

"The issues we raised have been dealt with but the deal still depends on the approval by government," he said. "Until such time as the figures are before us" the PIC won't be able to take a final decision as to whether to back it.

A Bharti spokesperson declined to comment on the statement. An e-mail to the MTN spokesperson remained unanswered.

Meanwhile, Reuters quoted a senior officials as saying that the tie-up needs cabinet level approval in South Africa.

The statement came as a team from the Indian firm was on the ground in South Africa meeting stakeholders, according to a person familiar with the situation. A top South African treasury official said the government was in talks with Indian authorities. "As far as we are concerned, we would like to promote south-south relations. The relationship between South Africa and India is a very important relationship," Treasury Director-general Lesetja Kganyago told journalists. "The decision will be taken by the executive ... A transaction of this magnitude is not a decision you just take on your own," Kganyago said.

Reuters added that the South African communications regulator also intervened, saying that a possible tie-up would need to be the subject of public hearings. "MTN's licence is clear, if the transaction involves change in shares it needs to notify the authority before the transaction is concluded," said Sekgoela Sekgoela, Independent Communications Authority of South Africa spokesman.

"Once the authority has that information (details of any share transaction), it can determine whether the transaction will need to be subjected to a public process or not. It cannot do so until it has all the facts before it."

The ICT industry, which includes telecom, has drawn up its own charter for economic empowerment policy that has some ambitious targets. These include having 50 per cent Blacks in senior management positions and at least 65 per cent of them in other management positions.

It also envisages that a minimum 25 per cent of the shareholders should be Black in public limited companies.  

After a failed attempt last year, Bharti Airtel  and MTN started talks in May  for a complex cash and share-swap deal worth $23 billion. Under the deal, the Sunil Mittal-promoted company is to  acquire a 49 per cent "economic interest" in MTN. In return, MTN will acquire 25 per cent "economic interest" for $2.9 billion and MTN shareholders will acquire another 11 per cent in Bharti Airtel. MTN and its shareholders will acquire 36 per cent in Bharti Airtel in the form of global depository receipts (GDRs) that will be listed on the Johannesburg stock exchange.

The deadline for the deal has been extended twice.

Get Rediff News in your Inbox:
Source: source
 

Moneywiz Live!