Bharti-MTN largest global telecom deal this year

The Sunil Mittal-controlled Bharti Airtel and South Africa-based MTN group's proposed $23-billion mega deal is the largest global telecommunications transaction and the fourth biggest global M&A deal this year.     

The Bharti-MTN deal with a potential value of $23 billion is nearly half of the total telecommunication merger and acquisition transactions announced till mid of this month.     

As per global deal tracking firm Dealogic, global telecom volumes in 2009 stood at $49.2 billion through 410 deals.     

"Not only for sheer size, this deal would be a first of its kind, because it is a stock and cash deal. It will bring to centre stage the use of stock as a mechanism to settle purchase consideration," global consultancy firm PricewaterhouseCoopers Executive Director Sanjeev Krishnan told PTI.     

Besides, the Bharti-MTN deal would be the fourth-largest deal so far this year after the Wyeth-Pfizer transaction amounting to $61.8 billion, Schering-Plough and Merck deal worth $45.9 billion and the US government hiking its stake in Citi to 36 per cent for $25 billion.     

Experts believe the Bharti-MTN deal certainly give a fillip to the M&A market in India, which has been somewhat dormant for a bit, but the lull in the merger and acquisition space is far from over.

"Since this was a deal the two parties had negotiated last year too, it is not a new transaction, so it may be premature to say that the lull in the M&A market has lifted - there are still financing and other challenges for most Indian businesses...," Krishnan said.     

The Bharti-MTN deal would involve a complex structure in which both the entities would pay cash and stock for stakes in each other. As per the exploring agreement, MTN would acquire around 36 per cent economic interest in Bharti Airtel. While, Bharti Airtel would acquire 49 per cent stake in MTN.     

"This deal is unique as for the first time company stock is being monetised in this manner to make an acquisition and it may just spur alternative mechanism for financing acquisitions in  times to come," Krishnan added.     

After the $23 billion Bharti-MTN deal, the Directv Group's $14.7 billion acquisition of Liberty Entertainment announced at the start of this month is the second largest telecommunications deal so far this year.     

Some other major global telecommunications deal include US-based Frontier Communications' $8.6 billion acquisition of Verizon Communications, Canada Pension Plan Investment Board's $4.8 billion investment in Macquarie Communications Infrastructure for 81.67 per cent stake in the company.     

This would be the biggest M&A deal involving an Indian entity. Prior to this, Tata Steel's takeover of European steel major Corus for $12.2 billion was the largest, followed by UK telecom giant Vodafone's controlling stake buy in mobile service provider Hutch Essar for about $10 billion.