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Why the MTN-Bharti Airtel deal collapsed

Rebecca Wanjiku | Oct. 1, 2009
The politics of national identity and corporate culture came into play

There is no doubt that MTN could have benefited from association with Bharti and SingTel, especially in terms of access to technology and well-trained human resource, according to some observers.

"MTN has been moving in the direction of outsourcing part of its back-end operations; therefore, a merger with Bharti would have presented an opportunity to outsource part of the functionalities like internal IT services and call centers to India," said Africa Analysis' Pater.

Racial politics also played a part in the fate of the deal. During the six-month results announcement in August, Nhleko expressed his commitment to comply with Black Economic Empowerment policies. Private companies must apply the black empowerment codes if they want to do business with any government enterprise or organ of state.

BEE policies stem from a reaction to the apartheid government that had systematically excluded Africans, Indians and people of color from meaningful participation in the country's economy and from ownership and participation in decision-making in large corporations. BEE policies require companies to adhere to guidelines for allocating shares to all racial groups.

The S.A. telecom regulator ICASA therefore decided that the deal would need to go through an approval process from a shareholder-analysis perspective, which is separate from the Competition Commission review and approval process. The deal, then, would have had to face extensive regulatory scrutiny on matters related to sensitive national policy issues.

So even if the deal had been approved by company officials and shareholders, there would have been no assurance that it would have complied with regulatory requirements in both countries and whether COSATU would have posed challenges on labor issues.

Ultimately the deal held the potential to reshape Africa's telecom market, but now no one will know for sure. Unless -- given the history of talks between the companies -- negotiations once again open up next year.

 

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