Bharti-MTN deal fell through...Inside story..

The fate of the unsuccessful Bharti-MTN deal was sealed by the South African government’s treasury as much as three weeks back, according to sources. CNBC-TV18 now learns that the treasury wrote to MTN Phuthuma Nhleko on September 11 insisting that for the deal to go through, the potential merged company should remain domiciled in South Africa and should be listed in both companies, something that was not a possibility under existing Indian laws.
MTN, South Africa’s largest telecom company, and India’s Bharti were exploring a deal that could lead to a merger between the two companies resulting in a USD 23 billion entity. This was the second — failed — attempt between the two companies to strike a deal. Earlier in May 2008, the two companies had initiated talks to explore the possibility of a similar deal.
The South African government’s pension fund, Public Investment Corp, holds 21% stake in MTN and the government was under intense pressure to not give a go-ahead to the deal on concerns that MTN’s South African identity would be lost, post the deal. Members of the treasury had, in fact, travelled to India on September 24 to understand the regulatory and legal framework of Indian laws and deliberate upon hurdles to the deal.
Sources say the treasury had raised the dual listing issue as early as mid August and had made it clear that it would be a no-deal in case India declined the request for an okay to the dual listing structure.
Why India said no to dual listing
A dual listing structure would have rendered India’s foreign direct investment policy ‘infructuous’ and would have led to huge tax losses to the government, sources said.
Sources said a dual listed company (DLC) would have weakened the oversight of market regulator Securities and Exchange Board of India (SEBI) as it would not be able to monitor overseas stock exchanges — MTN is currently listed on the Johannesburg Securities Exchange (JSE).
Not only would have a potential deal carried out under the DLC structure led to an export of capital market, it also had risks of multi-currency settlement infrastructure. “The DLC involved several statutory issues. The government was, however, open to considering a structure that involved issues related to American Depository Receipts (ADRs)/Global Depository Receipts (GDRs), which was the more feasible route.

Thats why INDIA say 'NO' to dual listing & like this India's telecom major Bharti Airtel and South Africa's MTN terminated their talks for a proposed $24-billion equity swap-cum-strategic alliance that could have potentially created the world's third largest mobile phone enterprise.

NITIKA DARMOLI.

PGDM-sec-B, 3rd sem.