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Twice-thwarted MTN turns its attention to Orascom
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Sure Kamhunga
Business Day
Thursday, April 29, 2010
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MTN yesterday confirmed market speculation that it was negotiating to buy part or all of Orascom Telecom, which, if successful, would cap a fitting end to CEO Phutuma Nhleko’s reign at Africa’s largest cellphone company after two failed attempts to merge with India’s Bharti Airtel.
Bharti, which had been courting MTN to assemble a telecoms behemoth with markets spanning from Africa, the Middle East to Southeast Asia, is now one of the JSE-listed telecoms company’s major competitors in Africa after recently concluding a $9bn deal to buy some of the African assets of cash-strapped Zain of Kuwait.
Nhleko, who has never hidden his desire to complete a major deal to further consolidate MTN’s grip as one of the largest telecoms firms in emerging markets, leaves MTN in March next year.
He is believed to have assembled a high-powered team that has been involved in secret talks in the UK with Orascom owners over a deal estimated to be worth as much as $10bn.
The fact the talks were held in such secrecy until last week, when market speculation went into overdrive, shows the extent to which Nhleko went to keep a lid on the discussions.
In its statement released to the JSE yesterday, MTN — which today releases its first quarterly subscriber numbers — cautioned that the talks with Orascom’s parent, Weather Investments, may or may not lead to it buying the Egyptian-based company or part of its businesses.
“MTN shareholders are informed that MTN is in discussions with Orascom Telecom’s parent company, Weather Investments SpA, which may or may not lead to a transaction relating to the acquisition by MTN of control of Orascom Telecom and/or certain of its businesses,” MTN said. “MTN shareholders are advised to continue to exercise caution in trading in their MTN securities until such time as a further announcement is made.”
Orascom, separately, also confirmed the talks. The group has operations in North Korea, Bangladesh, Pakistan, Egypt, Algeria, Tunisia, the Central African Republic, Burundi, Namibia and Zimbabwe.
Analysts said it was logical for MTN to seek another big-name company to buy after the failed merger with Bharti, where Nhleko’s attempts to reach a deal worth $23bn with the Indian firm’s majority owner, Sunil Bharti Mittal, was scuttled by regulatory and political concerns about a blue-chip South African firm falling into the hands of a foreign investor.
Had MTN succeeded, the combined company would have ranked as the world’s third-largest cellphone company by subscriber numbers.
Analysts said the move by MTN was not surprising given that there were now few assets left to buy, particularly in Africa, considered one of the few remaining frontiers for operators. “Frankly speaking, MTN had no choice but to quickly find something because worthwhile assets are now few and far between and Orascom was an obvious choice,” an analyst said yesterday. Additional reporting by Bloomberg
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