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Back to the drawing board for MTN

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MTN has stopped negotiations regarding an acquisition by Bharti Airtel, but has plunged straight into talks with Reliance Communications, also an Indian telecommunications player with 46-million customers on the sub-continent. 

A short statement from MTN this morning states that it was not able to reach agreement on a suitabale transaction structure with Bharti Airtel and, "by mutual agreement", ended the discussions.
However, it immediately issued a new cautionary statement regarding negotiations with Reliance.
"MTN has been approached by the Reliance Communications Group with regards to a potential business combination between Reliance Communications and MTN," says the statement. "MTN has agreed to enter into exclusive negotiations for a period of up to 45 days in respect of such potential combination."
The company cautions, however, that there is "no certainty that these discussions will result in a transaction".
Reliance Communications is part of India's Anil Dhirubhai Ambani Group, and its 46-million subscribers compare to MTN's 68-million in Africa.
It is believed the talks with Bharti Airtel may have broken down because a transaction would have pushed the Indian company's foreign ownership above the levels acceptable under Indian law.

The recent activity surrounding MTN sheds some light on the value seen in the African operator. Global growth consulting company Frost & Sullivan believes that the now aborted talks with Bharti Airtel and new discussions with Reliance Communications have come as no surprise, since MTN is a company that has a lot going for it.
“It is important to note that the company's real value does not simply lie with its large subscriber base and its presence throughout Africa and the Middle East,” says Frost & Sullivan ICT industry analyst Lindsey Mc Donald. “Part of its intrinsic value rests with MTN’s corporate culture.”
Mc Donald points out that MTN’s executive management team is a strong mix of ambition and experience, which has resulted in a company that has expanded aggressively into Africa and the Middle East. The success of the company's structure and its decentralised approach to market have meant quick market entry and expansion. They have also resulted in flexibility to varied market conditions.
Events such as the extension of a $2 billion loan to the company to expand its network in Nigeria (a key African market), are testimony to the market's confidence in the company.
“MTN's brand is another valuable aspect of the company,” Mc Donald notes. “Subscribers associate it with support for soccer and, more importantly, the introduction of innovative services such as MTN Zone.”
The company itself has recognised this, which is why it re-branded the Investcom operations it acquired in the Middle East.”
“Whatever the shape of the company moving forward, there is little doubt that the retention of the MTN brand and culture would be two of the most important aspects executive management and shareholders should ensure,” Mc Donald says.