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Bharti Airtel, MTN Merger Hits Stock

The Indian company's stock price plummeted after the announcement

Fears of over the eventual outcome of the Bharti Airtel and South Africa's MTN joining forces by buying into each others stockholding has taken a toll on the former's stock price, even though the latter's scrip is ruling on a high.

This announcement comes after a year of similar overtures that did not succeed on the question of who will lead the merged company. The question is still hanging in the balance.

With an eye on creating a $61 billion telecom behemoth spanning across India and Africa and some parts of Middle East, the cash and share deal spans $23 billion and includes the buying by Bharti of some 49 per cent worth of MTN. MTN would buy a 39 per cent stake in Bharti.

The effect on the bourses, in India and South Africa, was poles apart. While Bharti fell 5 per cent, MTN gained 5 per cent.

In effect the stakesale would lead to the combined entity having a customer base of 200 million.

What is fuelling the worry of Indian investors in Bharti is that the company may come under severe debt pressure, which at the moment it is not – something that Tata Steel is having trouble with after taking over Corus in a $13 billion deal, India’s largest-ever cross-border takeover. But for the long-term future of the company, the deal is considered to be beneficial for both companies, if they can decide who is the boss.

Also see:
Stock Report Bharti Airtel