Bharti set to dilute equity for MTN buy

In an attempt to raise a part of the capital required to fund the MTN acquisition, Bharti Airtel has initiated discussions with its shareholders to dilute equity.

At a 20 per cent premium, the South African company is valued at $45-47 billion. The Indian GSM provider is looking to acquire a 51 per cent stake in MTN.

To acquire the stake, Bharti will have to raise $20-25 billion. Of this amount, the company will raise around $18 billion as debt. "The remaining $2-7 billion (depending upon the deal size), will be raised through a dilution of equity," sources close to the development said.

Sunil Mittal, chairman and managing director of the Bharti Group, has begun discussions with the stakeholders to get their permission to dilute the stake. Bharti Telecom holds a 45.31 per cent stake in Airtel, Pastel 15.58 per cent, Indian Continent Investment 4.99 per cent. The remaining stake is held by the public and others.

Reuters adds: China Mobile, the world's biggest mobile carrier, said it is interested in the South Africa market but has not bid for MTN.

"China Mobile has not joined the MTN bidding but we are interested in the South African market and are looking at various opportunities for an entry," Chief Executive Wang Jianzhou told reporters today, following the firm's annual general meeting.

He declined to elaborate on the firm's intentions.

Marvin Lo, an analyst with the Daiwa Institute of Research in Hong Kong, said that if China Mobile were to bid for MTN, it would likely do so at the parent company level - an approach often taken by Chinese state-controlled companies when making acquisitions.

Those assets are then eventually injected into the listed units of state enterprises.

"China Mobile is always interested in overseas expansion, especially breaking into emerging markets," Lo said, noting that China Mobile's edge in a competitive auction would be its cash pile of more than $11 billion.

China Mobile, which is listed in Hong Kong and New York, also has access to credit from China's huge financial institutions, including policy lenders like China Development Bank, which led financing earlier this year for state aluminium giant Chinalco's $14 billion stake purchase in global miner Rio Tinto.

"It's the cash position that makes all the difference given that China Mobile does not have an edge in technology," Lo said.