MTN's minority shareholders oppose deal with Bharti

Bharti might get an all clear on the regulatory and funding front but there's some opposition to the deal from MTN minority shareholders and possibly from trade unions.

News reports in South Africa have quoted Polaris' Anthony Sedgwick, saying he does not want the deal to go ahead. Sedgewick is the co-manager of the Nedgroup Investments’ rainmaker fund that owns 6.3 million MTN shares.

The report said that Polaris was of the view that MTN shareholders were getting a raw deal.

South Africa's Trade Union Federation Congress has also expressed concerns over the proposed deal. It feels that the Bharti-MTN deal involves synergies which would result in job cuts in South Africa.

Also read: Bharti to be included in MSCI Index post MTN deal?

Here is a verbatim transcript of CNBC’s Samantha Loring’s comments. Also watch the accompanying video.

Firstly, from an investor point of view, the news has been sceptically received by asset managers. They think that a higher price might have to be paid. I spoke to Khulekani Dlamini, Portfolio Manager at Afena Capital saying that the deal valued MTN shares at around ZAR 128 each. Today they are trading at around ZAR 124, trading down in the last few days post the announcement of the deal, suggesting possible scepticism that the deal won’t go through.

The key issue for shareholders is that MTN is a telecommunications powerhouse in Africa. It dominates key markets like Nigeria which offer enormous potential for growth. It recently reached a 100 million subscriber mark, showing growth at a time when the global crisis has hurt growth in many markets.

I spoke to another minority shareholder at Standard; their Portfolio Manager said Standard currently owns 3.5% of MTN. But he said that on the one hand they do commend MTN for re-examining the deal after backing out last year and they realise it is imperative for MTN to always have future growth and subscribers in India is offering this growth to MTN.

Obviously, with India being a large market they feel that is really the only one good thing about the transaction. They are concerned that it doesn’t seem to be a merger of equals. It appears that Bharti has a stronger hand than MTN for this deal and for them to sell a pan-African company to Bharti, they don’t think that the premium offered is good enough.

So, the key issue is around price. They think that Bharti should be pegged upwards at around ZAR 200 if they want full control. Obviously, 49% is just under full control but at the shareholder’s meeting, possibly this would give them my majority vote, just being under that 1% vote and that won’t come through.

Certainly in India, foreign companies are precluded by law to own more than 49% of telecom companies in India. But if Bharti wants to come here, buy 49%, they are not precluded in South Africa. So, you wonder if there were similar regulations in South Africa to own majority in telecommunications companies whether this deal would go ahead.