Fitch Comments on Potential Transaction Between Bharti and MTN
Fitch Ratings-Singapore/Johannesburg-03 June 2009: Fitch Ratings has today commented that it will closely monitor developments following the disclosure by India's Bharti Airtel Limited (Bharti, 'BBB-'/Stable) and South Africa's MTN Group Limited (MTN, 'AA-'(ZAF)/Stable) that they are engaged in exclusive discussions to potentially acquire stakes in each other, with a view to eventually achieving a full merger. If the discussions are successful, Bharti will own 49% in MTN, and MTN and its shareholders will own an effective 36% economic interest in Bharti.
The agency takes note of the strategic merits of a potential partnership between Bharti and MTN, as well as the positive impact on their respective business risk profiles in terms of diversification and enhanced scale. Nevertheless given the early stages of the discussions, potential regulatory hurdles and other associated uncertainties surrounding the transaction, Fitch will await finalisation of the transaction structure before taking any formal rating action. Under the current terms as presented to the market, it could result in additional net debt of USD4.0bn at Bharti and USD2.9bn at MTN.
Fitch has linked Bharti's current rating to a maximum threshold of 1.5x on FFO adjusted net leverage on a sustained basis. In addition to funding for the proposed transaction, this trigger may also be tested by 3G license requirements, should Bharti emerge successful in the upcoming auction.
Bharti is one of India's leading private sector telecommunications operators with a pan-national cellular footprint, while South-Africa's MTN is one of the leading GSM operators in Africa and the Middle East with a geographic footprint across 21 countries.
Contacts: Priya Gupta, Singapore, +65 6796 7222/ priya.gupta@fitchratings.com; Karabo Matentji, Johannesburg, +27 11 380 0910/karabo.matentji@fitchratings.com.
Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: peter.fitzpatrick@fitchratings.com; Lisa Lim, Singapore, Tel: +65 6796 7214, Email: lisa.lim@fitchratings.com; Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email: shivani.sundralingam@fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. The issuers did not participate in the rating process other than through the medium of their public disclosure.
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