Govt backs merger 'in principal'

Johannesburg - The National Treasury confirmed on Wednesday that MTN had advised him that discussions with India's Bharti Airtel had been terminated.

In a statement, it said that the Minister of Finance, Pravin Gordhan, had held discussions this morning with MTN chair Cyril Ramaphosa and CEO Phuthuma Nhleko, regarding the proposed merger between MTN and Bharti Airtel.

"MTN advised the Minister that the two companies have mutually decided to terminate further discussions on the proposed merger, as they were not been able to conclude all outstanding matters to enable the transaction to proceed," the Treasury said.

"In principle, the South African government is supportive of local companies that want to grow and diversify offshore from a domestic base. We particularly welcome such diversification to emerging and developing countries, as South Africa is committed to deeper South-South relationships.

"The South African government believes that the structuring of such partnerships is best left to the companies themselves, who must make their decisions on commercial grounds.

"However, when companies structure their relationships outside the current exchange control regulatory framework for such transactions, they require the approval of the Minister of Finance.

"This was the case with the proposed MTN-Bharti merger, which required certain exchange control and other approvals," the Treasury stated.

It added: "The Finance Ministries of both South Africa and India are committed to working closely together to lay the basis for the development of mutually beneficial mechanisms for such mergers. In this regard, the National Treasury has invited our Indian counterparts to South Africa to continue working towards a framework to support the growth and expansion of companies in both countries."

Demands not 'unreasonable'

Emerging Market Economist at Nomura International, Peter Attard Montalto, said on Wednesday that Nomura stands by its previous view that there has not been any undue influence from the left around the MTN/Bharti deal, and the South African government's demands were not unreasonable given Bharti did not propose to have majority ownership.

Attard Montalto was reacting to news that talks about the proposed deal have been called off.

"Bharti are blaming abandoning of the deal on the South African government's position of insisting on dual listing and South African management," he said.

"We will now see a large amount of proxy hedge unwinding from people who went long ZAR on back of expected inflows as well as a greater willingness of people to go short ZAR for macro reasons (current account, fiscal etc), previously worried about inflows," he said.

He added that as such "we are more happy now with our 9.00 end year forecast for USD/ZAR."

"Given my views above I don't think that today's decisions has any real implications for South Africa in terms of FDI," he added.

- I-Net Bridge