Investors braced for bidding war for MTN

by The Times 100 on Tuesday 27th May, 2008

Investors braced for bidding war for MTN

In November 2007 Vodafone's £5 billion bid to gain control of Vodacom, which it co-owns with Telkom, South Africa's dominant telecoms operator, failed. The deal was called of by Telkom after failing to agree on price with a third party, MTN, its South African peer, which was to have bought Telkom's fixed-line assets. At the time, Arun Sarin, Vodafone's chief executive, said:”We would like to be in Africa to a greater extent. We would then run our African expansion from South Africa.” (The Times, 29 November 2007)

Vodafone was looking at a £20 billion bid for MTN, Africa's largest mobile phone operator. Arun Sarin was reported to have instructed his in-house acquisition team to examine options to buy MTN, following news last week that revealed it was considering selling a major stake to Bharti Airtel of India. MTN has 68 million customers in 21 countries across Africa and the Middle East. Most of its subscribers are in South Africa, Nigeria and Iran. The deal would have greatly increased Vodafone's exposure to emerging markets in Africa following its failure last year to take control of Vodacom. (The Sunday Times, 11 May 2008)

Sources close to Bharti said that 'two or three' deal combinations were being discussed. Bharti is believed to be willing to acquire a majority stake in MTN at a price that would value the South Africa-based firm at about $37 billion (£18.5 billion). MTN confirmed that it is in exploratory talks with Bharti and advised shareholders 'exercise caution'.” (Times Online, 6 May 2008)

If successful, the acquisition would transform India's biggest mobile company into an international giant with access to emerging markets across Africa and the Middle East. It would also be the largest takeover of a foreign firm by an Indian group. Business analysts believe news of the talks will attract a host of other bidders which may push up the acquisition price (Times Online, 6 May 2008).

However, late on 11 May it was reported that Vodafone had ruled itself out of the bidding war for MTN. A Vodafone spokesman said:”We have no intention of pursuing an offer for MT. We are committed to Vodacom, and if the opportunity arises to increase our stake in the company, then we would look to enter into discussions with Telkom.” (Financial Times, 11 May 2008)

Read the Times 100 case study on Vodafone, now one of the largest phone companies in the world. It has more than 15 million users in the UK alone. The market in which it works is high-tech. This means that it keeps changing and must look to expand to retain its place as a major player in the international mobile phone business.

Sources:

The Times Online – Vodafone to study £20bn bid for African operator MTN, 11 May 2008

The Times Online – Bharti Airtel dials in to MTN takeover talks, 6 May 2008

The Financial Times – Vodafone rules out bid for MTN, 11 May 2008

The Times 100 Edition 12 Case Studies – Vodafone, Using Business Principles to support ethical communication

Potential Study Questions:

  • Define the following terms: horizontal integration, vertical integration, conglomerate integration.
  • Which of the above types of integration would describe the takeover of MTN, had both parties gone ahead with their bids?
  • Discuss the advantages or disadvantages of each of the above types of integration.

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