Vodafone has smoothed the way for a tie-up between two of its biggest rivals. The UK mobile giant did not intend to help Bharti Airtel and MTN couple when it overcame political obstacles to increase its stake in its South African joint venture this month. But that is likely to be the outcome. Indeed, it’s no coincidence that Vodafone’s rivals, who abruptly abandoned talks last year, are suddenly once again trying to tie the knot. Vodafone’s victory against regulators has set a precedent which should make it easier for Bharti to take a 49 per cent stake and effective control of South Africa’s MTN.
The proud South African government will be reluctant to see a second major domestic mobile player fall into foreign hands in just a matter of months. Vodafone’s year-long negotiated deal nearly came unstuck just four days after the new South African government led by President Jacob Zuma took charge. Regulators, who had originally approved Vodafone’s bid to increase its stake in Vodacom from 50 per cent to 65 per cent, suddenly bowed to union pressure and tried to review the deal again. But Vodafone fought on in the courts which over-ruled the regulators’ sudden change of mind.
Of course, there’s a risk that Zuma might play a harder game with MTN and put pressure on the regulators upfront. But there are several reasons why getting the proposed MTN-Bharti deal approved should be easier than the Vodacom one. For a start, the government doesn’t have an equity interest in MTN, whereas it was one of the key shareholders in Vodacom. Meanwhile, Bharti is only proposing to take a 49 per cent stake, although there are some side deals designed to give the Indian group effective control. Finally, the unions who tried so hard to scupper Vodafone don’t seem to be too fussed about the Bharti move. Ironically, Vodafone’s success could help unite two of its biggest rivals.
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