Singtel - The Indian Connection

Bloomberg reported that Bharti Airtel (India’s biggest mobile phone company with 102.4 subscribers, of which quarterly record of 8.44 mln was added in Q2) and MTN (South Africa’s biggest wireless company) have reached a US$24 bln preliminary accord to buy each other’s shares, as a first step leading to a merger.

Bharti is to buy 49% of MTN for US$14 bln, while MTN will acquire 33% of Bharti for US$10 bln. If consummated (which requires 75% approval by shareholders of MTN), the deal will:

- create the world’s biggest mobile phone company with 200 mln subscribers and US$20 bln annual revenue;

- will dilute Sing Tel’s existing 30% stake in Bharti. (Sing Tel has said it was prepared to invest a further US$3 bln by buying more Bharti shares from minority shareholders of MTN receiving Bharti shares, to maintain the stake.)

The proposed merger between Bharti and MTN was first announced on May 25th, with Bharti offering 86 rand plus half a Bharti share for every MTN share. Yesterday, MTN closed at 127 rand and Bharti at 409.35 rupees. Bharti’s latest offer values MTN at 145 rand per share. (Bharti is generally believed to be anxious to merge with MTN given the rapid inroads into its market by Vodafone and Reliance.)

We remain Neutral on Sing Tel, which has no particularly attractive atrribute:

Sing Tel’s main attraction is its defensiveness, which is not appealing in current bullish market environment.

The 3.9% yield at $3.17 based on 12.5 cents paid for ye Mar ’09 is only average.

And as has been our stance all along, Bharti, AIS of Thailand, Globe Telecom of Philippines, Telkomsel of Indonesia are mere portfolio investments of Sing Tel, no basis for re-rating of the stock. (Note results comments have tended to focus on contributions from associates, which in turn are often subject to currency fluctuations.)

Sponsored Links

Related Posts by Categories