A year later, Bharti to save $4b on MTN deal
ET 28.05.2009
Bharti Would Have Paid $7-8B For 40% MTN Stake Last Year
THE collapse of negotiations between Bharti Airtel and South African telco MTN last year has turned out to be a boon for India’s largest telecom operator. The Sunil Mittal-promoted firm is making a net payment of just $4 billion for 49% stake and a controlling interest in the South African giant that has a presence in 21 geographies. Had the deal fructified last year, Bharti would have paid around $7-8 billion for a 40% stake in MTN. While Bharti is also giving a 36% stake to MTN and its shareholders, the net dilution is only 23.5% because Bharti will also hold 49% in MTN. More importantly, Bharti is now expected to get substantial participatory and governance rights in MTN which will enable it to consolidate the accounts of MTN and indicate its preference towards gaining control of the South African firm. “There has been a correction in MTN’s stock price as compared to last year, which has helped Bharti. If the deal was done last year, Bharti would have taken a larger debt on its balance sheet. In that sense, the collapse of talks last year was a blessing for Bharti,” said Nishna Biyani, telecom analyst at brokerage Prabhudas Lilladher. While there was no written word from Bharti on the deal structure last time, it was said to involve a full takeover of MTN Group, valuing MTN at 180-190 rands per share. This time around, Bharti is acquiring the stake in MTN at 170 rands per share. “Things have changed in the last one year with valuations having collapsed. It is certainly a better time to do a deal and Bharti is well-placed now by all yardsticks,” said Harit Shah, analyst (telecom & IT) at Angel Broking. Another factor that has worked in favour of Bharti has been the change in FDI norms through press notes 2, 3 and 4 in February this year. In 2008, foreign holding in Bharti was almost 70% and it would have faced FDI issues if it had gone ahead with MTN talks. p However, as per new norms, a company is considered Indian if Indian promoters have at least 51% stake. Also, the investments made by such companies in any joint venture or downstream venture will be treated as Indian. Since a major part of SingTel's 31% stake and Vodafone's over 4% share are routed through majority-owned Indian companies, the transaction is FDI-compliant. Mr Shah said it is a “game-changing initiative” by Bharti and is necessary to enable the telco to expand its horizons beyond India. "Such acquisitions, which involve the marriage of equals, must always be looked at from a longer-term perspective. Bharti may have to undergo some pain in the form of significant debt being taken on and equity dilution before realising the potential gains from such an acquisition,” he said. Bharti currently has around $1 billion in cash and short-term investments, which it is likely to reserve for auctions. It is expected to raise around $4 billion from the market. Standard Chartered is learnt to be underwriting a $3.5 billion loan for Bharti. TRUNK CALL The Sunil Mittal-promoted firm is making a net payment of just $4b for 49% stake and a controlling interest in MTN Had the deal fructified last year, Bharti would have paid around $7-8 billion for a 40% stake in the South African company While Bharti is also giving a 36% stake to MTN and its shareholders, the net dilution is only 23.5%
Court tells BSNL to give reasons for disqualifying Nokia Siemens offer
Business Line 27.05.2009
New Delhi, May 26 The High Court of Punjab and Haryana has directed Bharat Sanchar Nigam Ltd to give reasons for disqualifying the offer from Nokia Siemens Networks for the PSU’s 93-million GSM line. The court has set a deadline of Wednesday afternoon for BSNL to file its response.
Finnish telecom equipment company Nokia Siemens had challenged BSNL’s decision to disqualify its bids on technical grounds. NSN’s primary grouse was that it had supplied equipment to BSNL on previous occasions and, therefore, it was unfair to find technical problems with its bid. NSN alleged that BSNL had designed the tender to favour some vendors. According to NSN, the PSU had not explained what technical deficiencies have been found in its bid. In a letter to the Department of Telecom, NSN said that it had clarified all questions BSNL had raised during the valuation of the technical bids.
The High Court told NSN that it can approach the Bench again if it was not satisfied with the reasons given by BSNL. During the proceedings today, counsel for BSNL asked for more time to submit the reasons but the court declined.
On May 15, BSNL opened the financial bids submitted by Ericsson and Huawei for its 93-million line GSM contract estimated to be worth Rs 30,000 crore. Ericsson had been short-listed for North and East zones. Though Huawei had qualified for West, East and South zones, BSNL opened the bid only for the South zone after security agencies raised concerns about giving contracts to Chinese manufacturers.
Other bidders, including ZTE, Nokia Siemens and Alcatel Lucent, were disqualified on technical grounds and so their financial bids were not opened. Disqualified from bidding for the project, Nokia Siemens had sought the intervention of the Competition Commission of India and the Central Vigilance Commission on the grounds that the tendering process was not transparent. It had raised questions on the disqualification, given that the Finnish company supplies equipment to operators worldwide, including Vodafone and Bharti Airtel in India. The company told the CCI that if its equipment was good enough for BSNL’s previous contracts then how could it be disqualified on technical grounds for the new project.
Nokia Siemens also highlighted the lack of competition in the bidding process since BSNL’s technical committee qualified bids from only one equipment supplier in three of the four zones. BSNL may have lost out in getting the best price in the process.
Etisalat-Swan gets DoT NoC to buy Allianz Infra
ET 27.05.2009
NEW DELHI: Telecom service provider Etisalat-Swan has bought out Allianz Infratech, marking the first acquisition among the new companies who were given telecom licences last year. Etisalat-Swan has also got a ‘no-objection certificate’ from Department of Telecom (DoT) for the deal, which is estimated to be worth a few hundred crores. Allianz had applied for telecom licences on a pan-India level, but was given permission to launch services in only two circles — Madhya Pradesh & Bihar. Swan, which has bagged licences to operate in 13 of the 22 telecom zones in India, is not present in these two circles. Allianz Infratech is promoted by four individuals — aviation entrepreneur Ajay Singh, Ashish Singh, Praveen Singh and Ashish Deora, who hold 25% each in the company. Last year, UAE’s Etisalat had picked up a 45% stake in Swan for $900 million. ET had first reported in its edition on September 25, 2008 that the Swan-Etisalat combine would buy out the telecom licences held by Allianz Infratech. Following the deal, Etisalat-Swan, which is expected to launch services soon, will be able to provide telecom facilities in 15 circles covering over a billion people. Allianz has become the first of the new entrants to sell out. Its promoters have opted to sell out even as the government is debating lock-in clauses to prevent new entrants, who got licences at prices fixed in 2001, from cashing out. Last year, Allianz Infratech failed to make the cut to bag a pan-India telecom licence as its net worth was lower than the mandated Rs 1,350 crore. It was later awarded licences for only two circles. There have been allegations that the DoT had given licenses in two circles to Allianz in order to allow Etisalat-Swan to buyout the company and expand its footprint. While Allianz paid about Rs 30 crore as entry fee for these two circles, the value of these licences would be multiples of that amount. For instance, Swan paid about Rs 1,400 crore for its licences in 13 circles, but offloaded 45% stake to UAE’s Etisalat for $900 million (Rs 4,500 crore). The DoT, in a communication to Etisalat, said that it was granting a ‘no objection certificate’ for the merger subject to both companies meeting all regulatory requirements. Etisalat-Swan will also get the 4.4 MHz of start up radio frequencies that is held by Allianz in both the circles. The DoT has also asked Etisalat-Swan to submit a fresh proposal for the merger after the deal has been approved by the High Court or tribunal.
ET 28.05.2009
Bharti Would Have Paid $7-8B For 40% MTN Stake Last Year
THE collapse of negotiations between Bharti Airtel and South African telco MTN last year has turned out to be a boon for India’s largest telecom operator. The Sunil Mittal-promoted firm is making a net payment of just $4 billion for 49% stake and a controlling interest in the South African giant that has a presence in 21 geographies. Had the deal fructified last year, Bharti would have paid around $7-8 billion for a 40% stake in MTN. While Bharti is also giving a 36% stake to MTN and its shareholders, the net dilution is only 23.5% because Bharti will also hold 49% in MTN. More importantly, Bharti is now expected to get substantial participatory and governance rights in MTN which will enable it to consolidate the accounts of MTN and indicate its preference towards gaining control of the South African firm. “There has been a correction in MTN’s stock price as compared to last year, which has helped Bharti. If the deal was done last year, Bharti would have taken a larger debt on its balance sheet. In that sense, the collapse of talks last year was a blessing for Bharti,” said Nishna Biyani, telecom analyst at brokerage Prabhudas Lilladher. While there was no written word from Bharti on the deal structure last time, it was said to involve a full takeover of MTN Group, valuing MTN at 180-190 rands per share. This time around, Bharti is acquiring the stake in MTN at 170 rands per share. “Things have changed in the last one year with valuations having collapsed. It is certainly a better time to do a deal and Bharti is well-placed now by all yardsticks,” said Harit Shah, analyst (telecom & IT) at Angel Broking. Another factor that has worked in favour of Bharti has been the change in FDI norms through press notes 2, 3 and 4 in February this year. In 2008, foreign holding in Bharti was almost 70% and it would have faced FDI issues if it had gone ahead with MTN talks. p However, as per new norms, a company is considered Indian if Indian promoters have at least 51% stake. Also, the investments made by such companies in any joint venture or downstream venture will be treated as Indian. Since a major part of SingTel's 31% stake and Vodafone's over 4% share are routed through majority-owned Indian companies, the transaction is FDI-compliant. Mr Shah said it is a “game-changing initiative” by Bharti and is necessary to enable the telco to expand its horizons beyond India. "Such acquisitions, which involve the marriage of equals, must always be looked at from a longer-term perspective. Bharti may have to undergo some pain in the form of significant debt being taken on and equity dilution before realising the potential gains from such an acquisition,” he said. Bharti currently has around $1 billion in cash and short-term investments, which it is likely to reserve for auctions. It is expected to raise around $4 billion from the market. Standard Chartered is learnt to be underwriting a $3.5 billion loan for Bharti. TRUNK CALL The Sunil Mittal-promoted firm is making a net payment of just $4b for 49% stake and a controlling interest in MTN Had the deal fructified last year, Bharti would have paid around $7-8 billion for a 40% stake in the South African company While Bharti is also giving a 36% stake to MTN and its shareholders, the net dilution is only 23.5%
Court tells BSNL to give reasons for disqualifying Nokia Siemens offer
Business Line 27.05.2009
New Delhi, May 26 The High Court of Punjab and Haryana has directed Bharat Sanchar Nigam Ltd to give reasons for disqualifying the offer from Nokia Siemens Networks for the PSU’s 93-million GSM line. The court has set a deadline of Wednesday afternoon for BSNL to file its response.
Finnish telecom equipment company Nokia Siemens had challenged BSNL’s decision to disqualify its bids on technical grounds. NSN’s primary grouse was that it had supplied equipment to BSNL on previous occasions and, therefore, it was unfair to find technical problems with its bid. NSN alleged that BSNL had designed the tender to favour some vendors. According to NSN, the PSU had not explained what technical deficiencies have been found in its bid. In a letter to the Department of Telecom, NSN said that it had clarified all questions BSNL had raised during the valuation of the technical bids.
The High Court told NSN that it can approach the Bench again if it was not satisfied with the reasons given by BSNL. During the proceedings today, counsel for BSNL asked for more time to submit the reasons but the court declined.
On May 15, BSNL opened the financial bids submitted by Ericsson and Huawei for its 93-million line GSM contract estimated to be worth Rs 30,000 crore. Ericsson had been short-listed for North and East zones. Though Huawei had qualified for West, East and South zones, BSNL opened the bid only for the South zone after security agencies raised concerns about giving contracts to Chinese manufacturers.
Other bidders, including ZTE, Nokia Siemens and Alcatel Lucent, were disqualified on technical grounds and so their financial bids were not opened. Disqualified from bidding for the project, Nokia Siemens had sought the intervention of the Competition Commission of India and the Central Vigilance Commission on the grounds that the tendering process was not transparent. It had raised questions on the disqualification, given that the Finnish company supplies equipment to operators worldwide, including Vodafone and Bharti Airtel in India. The company told the CCI that if its equipment was good enough for BSNL’s previous contracts then how could it be disqualified on technical grounds for the new project.
Nokia Siemens also highlighted the lack of competition in the bidding process since BSNL’s technical committee qualified bids from only one equipment supplier in three of the four zones. BSNL may have lost out in getting the best price in the process.
Etisalat-Swan gets DoT NoC to buy Allianz Infra
ET 27.05.2009
NEW DELHI: Telecom service provider Etisalat-Swan has bought out Allianz Infratech, marking the first acquisition among the new companies who were given telecom licences last year. Etisalat-Swan has also got a ‘no-objection certificate’ from Department of Telecom (DoT) for the deal, which is estimated to be worth a few hundred crores. Allianz had applied for telecom licences on a pan-India level, but was given permission to launch services in only two circles — Madhya Pradesh & Bihar. Swan, which has bagged licences to operate in 13 of the 22 telecom zones in India, is not present in these two circles. Allianz Infratech is promoted by four individuals — aviation entrepreneur Ajay Singh, Ashish Singh, Praveen Singh and Ashish Deora, who hold 25% each in the company. Last year, UAE’s Etisalat had picked up a 45% stake in Swan for $900 million. ET had first reported in its edition on September 25, 2008 that the Swan-Etisalat combine would buy out the telecom licences held by Allianz Infratech. Following the deal, Etisalat-Swan, which is expected to launch services soon, will be able to provide telecom facilities in 15 circles covering over a billion people. Allianz has become the first of the new entrants to sell out. Its promoters have opted to sell out even as the government is debating lock-in clauses to prevent new entrants, who got licences at prices fixed in 2001, from cashing out. Last year, Allianz Infratech failed to make the cut to bag a pan-India telecom licence as its net worth was lower than the mandated Rs 1,350 crore. It was later awarded licences for only two circles. There have been allegations that the DoT had given licenses in two circles to Allianz in order to allow Etisalat-Swan to buyout the company and expand its footprint. While Allianz paid about Rs 30 crore as entry fee for these two circles, the value of these licences would be multiples of that amount. For instance, Swan paid about Rs 1,400 crore for its licences in 13 circles, but offloaded 45% stake to UAE’s Etisalat for $900 million (Rs 4,500 crore). The DoT, in a communication to Etisalat, said that it was granting a ‘no objection certificate’ for the merger subject to both companies meeting all regulatory requirements. Etisalat-Swan will also get the 4.4 MHz of start up radio frequencies that is held by Allianz in both the circles. The DoT has also asked Etisalat-Swan to submit a fresh proposal for the merger after the deal has been approved by the High Court or tribunal.
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