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FM's blessings for MTN merger
September, 16th 2009

Finance minister Pranab Mukherjee on Tuesday indicated Indias support for the proposed alliance between Bharti and MTN as South Africa waved the red flag of national pride and insisted on its home-grown multinational retaining its character as a South African entity following any deal between the mobile phone companies.

At the heart of the issue between the two governments is the question of allowing a dual listing company structure for Bharti-MTN , and Mr Mukherjee suggested, but did not promise, that South Africas concerns would be addressed. There is a provision for the dual listing of companies .

The South African (finance) minister (Pravin Gordhan) met me at G-20 finance ministers meeting (in London earlier this month) and there I suggested to him that this arrangement is to be looked into in the Indian context... There is no assurance as such, but I told him that we will look into this matter and we will see what can be done, Mr Mukherjee told ET NOW, this papers channel.

M r Mukherjee also wrote in a September 10 letter to Mr Gordhan that we need to move together to enhance cooperation in trade and investment matters and a deal such as the one under consideration would be a good example of such an effort....
Dual-listed companies retain their separate legal identities and listings on stock exchanges while entering into equalisation agreements to collectively run operations and share profits or losses. Such arrangements are seen protecting the national identities of companies.

Dual listing is not allowed in India and will need major changes to key corporate laws. On Monday, Bloomberg cited a s p o k e s m a n for South Africas communications minister and reported that MTN should keep its South African character to win approval for an alliance with Bharti. We obviously value MTN as a South African company; we want it to retain that character, it quoted Tiyani Rikhotso , a spokesman for communications minister Siphiwe Nyanda , as saying.

The proposed $23-billion deals contours, unveiled in May, involves MTN taking a 25% economic interest in Bharti Airtel for $2.9 billion plus new shares in the South African telco which is equivalent to 25% of MTNs existing shares. Besides, MTN shareholders will also get an 11% stake in Bharti Airtel through GDRs that will be listed on the Johannesburg Stock Exchange.

The deadline for exclusive talks has already been extended twice and the latest one expires on September 30. A senior finance ministry official told ET that the South African governments request to allow dual listing is difficult to oblige under current laws and India has clearly told South Africa that this issue is presently not on Indias radar.

SA demand will not trip deal

THE official pointed out that India already allows dual listing of receipts by companies, a fact that was alluded to by the finance minister on Tuesday in Chennai. He said the country allows foreign firms to issue Indian Depository Receipts while Indian companies can issue ADRs or GDRs. By doing so, shareholders of these companies get all benefits except voting rights, which they can acquire through direct foreign investment.

India has also clarified that a bilateral investment promotion agreement that is under negotiation between the two countries would include provisions for mergers and acquisitions but not provide for dual listing of shares.

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