The summer break is nearly over for most of us, and judging from the news over the last few days it looks like September’s biggest story is the last sprint in the discussions between South Africa-based MTN Group and Indian Bharti.
After allowing themselves a bit more time by postponing the decision to the end of September, things seem to be moving with Bharti announcing that they have secured $5 billion in funding from a consortium of banks. This looks like an encouraging development in the long story, but the deal is still far from being agreed, as MTN’s shareholders need to be convinced that they are not giving away their company at too low a price, particularly as MTN’s half-year results are very positive (the group announced 30.6% year-on-year growth to $1.16 billion in its H1′09 net profits 29.2 million new subscribers added in last twelve months to reach a total of 103.2 million mobile subscribers). It may take MTN’s management team a lot of persuasion to ensure that all is confirmed by the deadline, as they’ll have to convince not only shareholders but also Public Investment Corp. Ltd (PIC), a body controlled by the South African government that holds nearly a 20% stake in the company, to accept the deal.
If/when the deal goes through, this will make the new group the 3rd largest in the world. It will bring together groups that have pioneered emerging markets business models with great success, and put them in a great position to reach the next wave of consumers. As their territories reach levels of penetration of around 30-40%, they need to adjust their strategies to continue growing. An apparently obvious answer is reaching the rural areas, but providing coverage there is difficult, and balancing the necessary costs with the market’s low spending power is no easy task. That is where the Bharti-MTN alliance could prove particularly successful. Indian operator groups are champions of the low cost model, based on outsourcing and delivering cheap services. As MTN is giving priority this year to improving its networks across Africa (spending $2 billion in the first half of 2009 on capex), both groups could learn from sharing each other’s expertise and buying power.
Overall, it has been refreshing to see telecom news that were not centred on declining revenues or other stories related to the global economic downturn. To see international companies based in Africa seriously competing with global giants is very encouraging for the continent’s future. It makes the telecoms industry all the more exciting to work in.
Finally, I’ll end with a little plug: the programmes of our biggest events of the year – AfricaCom in Cape Town in November and Telco World Summit in Dubai in December - are now ready to see. We have a great speaker line-up so don’t hesitate to have a look, and join us there!