A deal between two business giants create hope and despair equally. Hope because they can provide better service and extent their areas of reach. Despair because they become casual and arrogant. In most cases after mergers they become dominant mentality as there are few who can challenge their superiority in business. The two continental miracle merger of Bharti Airtel and MTN, Indian and South African telecom giants gives this cocktail of hope and despair. Given the code of ethics followed by Bharati one can have less despair and more hope in the betterment of mobile services in two continents. The sooner these two companies get rid of their national roadblocks regarding the merger the better for the telecom users.
The Times of India writes (3 October 2009)
An alliance between India's biggest mobile phone operator Bharti Airtel and South Africa's flagship telecom firm MTN would have created an entity
with $20 billion in annual revenue and 200 million wireless subscribers spanning continents. The dream was to build the world's third largest wireless operator. But more than just regulatory hurdles punctured it.
Even as people speculate about what made MTN play runaway bride at the altar, South African authorities deny playing spoiler. But the fact is that they insisted at a late stage on dual listing: companies maintaining separate sets of shareholders while joining operations and sharing profits/losses. This wasn't allowed under Indian rules.
The demand became a deal-breaker, having turned a business transaction into a subject of political hardball just before a looming deadline for ending talks. Dual listing demanded India's nod to capital account convertibility and change of company law. It was unlikely these could be hastily pushed through to facilitate one deal. An interim arrangement was thought possible, via Bharti-MTN's two-way acquisition of equity stakes, while the authorities concerned reflected on their respective positions. But the deal's nixing raises questions about the stated official backing for it, Pretoria's in particular.
Though it's not the end of the world for Bharti or MTN, there are lessons here. Commercial entities are doubtless rooted in specific nations and cultures. But we live in a world of growing economic integration. A Bharti-MTN tie-up would have scored a big goal for South-South cooperation, spectacularly signalling the rising clout of emerging markets. South Africa's insistence on MTN's "national character" was, therefore, not only off the mark but also out of sync with the spirit of the transaction. The deal's aim was to create a win-win situation for both firms through the expansion they needed to beat market saturation and to increase competitiveness. South Africa's stand is also baffling given that another national wireless carrier had earlier given controlling stakes to a British firm.
India, on its part, will need to rethink rules on taxation, company law and the exchange rate regime for easier facilitation of cross-border deals involving capital inflows and outflows. If Indian firms are to dream big, an enabling regulatory framework will have to support the kind of bold acquisitions they'll look at to spread their wings. Thanks to globalisation and the consequent unshackling of corporate vision, trade, investment and labour can't but seek to go beyond frontiers. Governments will increasingly be called upon to both keep pace and smoothen the road.
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