SCENARIOS: Possible outcomes of Bharti, MTN deal talks

MUMBAI Mon Aug 3, 2009 4:50am EDT

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MUMBAI (Reuters) - India's Bharti Airtel (BRTI.BO) and South Africa's MTN Group (MTNJ.J) extended talks -- aimed at merging their operations to create the world's third-largest mobile operator -- by a month to August 31.

Exclusive negotiations toward a deal, which would see each firm pay cash and stock for a stake in the other, were due to end on July 31.

Here are some of the possible outcomes of the talks:

BOTH COMPANIES CLINCH A DEAL An agreed deal is the most likely outcome at this stage as talks have progressed smoothly, if slowly, over the past month.

The two sides have engaged regulators, met with banks for funding the deal and most shareholders of Bharti and MTN see benefits in combining the two companies.

Analysts say the agreement to extend talks shows the two firms are eager to close the deal, but the complexity of the transaction has led to the delay.

The companies said deal terms may change.

"The current stage of negotiations indicate that both the parties are serious enough to consummate the deal," said Kevin Trindade, a sector analyst with KR Choskey Shares and Securities.

DEAL COLLAPSES An unlikely outcome. However, the two sides could still choose to walk away from a deal given the complexity of the transaction and the regulatory approvals required.

Bharti and MTN revived talks for a tie-up in May, a year after talks broke down over who would control a merged entity. MTN had talks with Bharti rival Reliance Communications (RLCM.BO) in May 2008, but these also failed.

Analysts say Bharti and MTN are better prepared this time around.

ANOTHER EXTENSION Another deadline extension is unlikely, as shareholders would not take kindly to continued uncertainty. But, another extension might be possible if it promises to be short, say a week or two, to untangle the last few strands.

Television news channel ET NOW cited Bharti Airtel director Akhil Gupta as saying on Monday, "I would have no reason to believe that it should need to be extended further."

REVISED TERMS AND CONDITIONS

Bharti and MTN said separately the structure and terms of the potential transaction may be adjusted to reflect further discussions between the parties, underlining the concerns of some key MTN (MTNJ.J) shareholders.

"This is the first clear indication from Bharti that the price could be increased and deal may not be in the same form. They have room to increase the stock part under India FDI (foreign direct investment) rules," said Sanjay Chawla, a sector analyst at Anand Rathi Securities.

"But MTN may ask for raising the cash too. It may well end up as a change in both."

Several MTN shareholders, including its largest -- South Africa's state pension fund Public Investment Corp -- have said there was room for improvement in the price.

(Additional reporting by Sumeet Chatterjee in Bangalore)

(Reporting by Narayanan Somasundaram; Editing by Himani Sarkar and Anshuman Daga)

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