Despite intense deliberations for over past four months, the merger talks between two telecom majors — Bharti Airtel and South Africa’s MTN — were called off on Wednesday after the South African government rejected the structure of the proposed deal worth $23 billion.

“This structure (of the proposed deal) needed an approval from the government of South Africa, which has expressed its inability to accept it in the current form. In view of this, both companies (Bharti Airtel and MTN) have taken the decision to disengage from discussion… We hope the South African government will review its position in the future and allow both companies an opportunity to re-engage,” Bharti Airtel said in a statement. This is the second time in just over a year when the merger talks between the two telecom giants had been abandoned.

The main irritant was the issue of dual listing of MTN to maintain its identity in the merged company. The South African government was not only against MTN losing its identity but has also disapproved the idea of the South African telecom firm being taken over by foreign nationals. “It would be sad if we saw this entity move into the hands and management of foreign nationals. Its management must remain South African,” South African Communications Minister Siphiwe Nyanda had told journalists earlier in the day at Johannesburg.

The deal talks, which began on May 25 and saw two extensions, envisaged creating a combined entity of $20 billion in revenues and 200 million (20-crore) subscribers globally. Sunil Mittal-led Bharti Airtel had proposed acquisition of 49 per cent shareholding in MTN, while MTN and its shareholders would have acquired about 36 per cent economic interest in Bharti, of which 25 per cent would be held by MTN with the remainder held directly by MTN shareholders. Airtel and MTN had signed agreement to hold exclusive talks for a deal that could include $10 billion in cash and $13 billion in shares.

“The alliance planned between Bharti and MTN was a vision based on solid fundamentals, which had the potential of creating an emerging markets telecom giant and the third largest telecom company in the world (behind China Mobile and the Vodafone Group). Substantial synergies could have been captured with this proposed transaction. The broad structure being discussed by the two sides had taken into account the sensibilities and sensitivities of both companies and both their countries. This transaction would have been the single largest foreign direct investment into South Africa and one of the largest outbound FDIs from India,” the statement said.

It thanked Indian government authorities, particularly Prime Minister Manmohan Singh, Union Finance Minister Pranab Mukherjee, Commerce and Industry Minister Anand Sharma, and Minister of Corporate Affairs Salman Khurshid, for supporting the talks. Significantly, Dr. Singh had backed the deal and had discussed the issue with South African President Jacob Zuma at the recent G20 Summit in Pittsburgh.

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