New Delhi, May 12: The tables have turned since May 5 when telecom czar Sunil Mittal’s Bharti Airtel and South Africa-headquartered MTN confirmed they were engaged in exploratory talks for a merger and acquisition (M&A) deal. On May 5, in terms of market capitalisation, Bharti Airtel was bigger than MTN. It had a market cap of $41.8 billion, while MTN’s market cap was $5 billion less at $36.8 billion. Today (ie May 12), Bharti has a market cap of $37.96 billion, while MTN has a market cap of $38.3 billion.

This, in just a week, MTN has become a more valuable company than Bharti Airtel, clearly making the deal a tad more expensive for India’s largest mobile telephony company. In the six days since the announcement, the Bharti stock has dropped 6.2 per cent in rupee terms. In dollar terms, it has fallen by almost 9.2 per cent since the rupee depreciated 2.3 per cent last year, the most since 1998. The MTN stock, meanwhile, has risen 3.9 per cent in dollar terms.

Bharti Airtel share today closed at Rs 838 at the Bombay Stock Exchange (BSE). Its closing price was Rs 893.85 on May 5. MTN’s share price was Euro 12.8 on May 5, while it closed at Euro 13.3 in the Berlin Stock Exchange today. MTN is listed in Berlin, Frankfurt, Munich and Johannesburg. Analysts have raised concerns over the impact of a takeover on Bharti Airtel’s financials. For example, credit rating agency Standard and Poor’s said, “While a prominent overseas investment adds diversity to Bharti’s businesses and cash flows, the financing and debt requirements are of greater concern, especially since Bharti has budgeted capital expenditures of about $3.3 billion a year.” This is one reason why Bharti Airtel’s share price is taking a beating in the stock markets.

After phenomenal success on its home turf in India, Bharti has aspirations to go global. MTN has a total subscriber base of 68 million customers while Bharti has a subscriber base of about 64 million. If the deal goes through, the combined entity will have a subscriber base of 132 million. This would make Bharti the world’s fourth largest company after China Mobile, Vodafone and China Unicom. China Mobile and China Unicom are government-controlled companies.

MTN operates in high potential markets including Africa, Iran, Afghanistan and Syria. Some analysts have estimated that MTN has the potential to accumulate up to 240 million subscribers in these markets by 2012. However, a major challenge Bharti will face in seeing the deal through is that it will have to take permission from over 20 countries where MTN operates.