As it turns out, the Singapore-based SingTel will remain the third significant partner, adding 150 million subscribers to Bharti and MTN’s combined subscriber base of 200 million.
When the home-grown telecom biggie, Bharti Airtel, announced its renewed share swap-cum-merger talks with South African MTN after similar talks collapsed a year ago, the one obvious loser that everyone pointed to was SingTel that owns 30.4 percent in Bharti Airtel.
Nobody quite knew if the Bharti management had taken SingTel into confidence, and everybody, including Citigroup, presumed that SingTel would be reduced to Bharti’s best man in the marriage of two Third World giants. A day after the Bharti-MTN announcement, Citigroup went to town claiming, “SingTel has no direct deal involvement and that its present 30.5 percent (effective) stake in Bharti may get diluted to 19.4 percent. SingTel is likely to become a small shareholder in the larger entity.” What should have added to that discomfiture at being “left out” of the deal was Bharti’s boast that while MTN would leverage the deal to grow in Africa and West Asia, Bharti would expand it’s footprint in Asia.
SingTel will not only remain a significant player in the Bharti-MTN merger sweepstakes, it sees its footprint expanding to Africa and West Asia where it has had no presence so far. Also, it has not made any matching commitment to allow Bharti to expand to the rest of AsiaPac where SingTel has substantial presence all the way from Pakistan to way down south in Australia.
In other words, while both MTN and Bharti have claimed that they will grow in their respective markets, SingTel is actually poised to penetrate new markets through the proposed merger. To get a clear understanding of what the Bharti-MTN merger meant for SingTel, FC posed questions to both Bharti and SingTel. We asked both to define Asia in terms of Bharti’s stated plans to grow in the continent, and clarify if SingTel’s stake would eventually come down as a result of Bharti’s merger with MTN. We also asked both to clarify the nature of the no-compete agreement that defines their respective markets.
The responses of both Bharti and SingTel were evasive and wrapped in corporate doublespeak that seemed to conceal more than they sought to reveal.
Yet, cutting through the clutter, it turns out SingTel, as the third, and yet behind-the-scenes-player, stands to gain far more than lose in the ongoing merger talks. Here’s why:
“We along with Bharti, are exploring this potential transaction (with MTN) as it represents a natural extension of both SingTel and Bharti’s footprints into Africa and West Asia,” a SingTel spokesperson said in an e-mail response.
If the deal comes through, it would be SingTel’s first foray into West Asia and African markets. At present, SingTel owns 21.4 percent in Thailand’s Advanced Info Service, 30 percent in Pakistan’s Warid Telecom, 30.4 percent in India’s Bharti Airtel, 35 percent in Indonesia’s Telekomsel, 45 percent in Pacific Bangladesh Telecom and 47.3 percent in the Philippines’ Globe Telecom. SingTel also has presence in Australia through its 100 percent subsidiary Optus.
The SingTel group claimed a total subscriber base of 249.39 million, including Bharti’s 93.9 milllion, as on December 31, 2008. Minus Bharti, the SingTel group’s total subscriber base should total about 150 million. Given its intent to add West Asia and Africa to its footprint, SingTel can lay claim to a combined subscriber base of 350 million (including 100 million each of Bharti and MTN as declared on May 25), making the SingTel-Bharti-MTN combine the world’s second biggest mobile operator after China Mobile’s 483 million strong subscriber base.
Asked to clarify if SingTel’s association with Bharti was defined by a no-compete agreement in each other’s territories, and how such an agreement would define Bharti’s desire to expand its footprint in Asia, the Bharti spokesperson preferred to remain silent.
The SingTel spokesperson wrote back saying that the company did not comment on its agreements with associates as they were private and confidential. On whether a no-compete agreement would restrict Bharti’s indpendent growth in Asia, the SingTel spokesperson said, “In line with our position as a strategic investor, we always seek to add value to our associates through both organic and inorganic means. As we have said before, where it makes sense, we will leverage the strength of our scale and provide support to our associates to grow into emerging markets.”
While much of SingTel’s aspirations for West Asia and Africa are clear in the company’s clarifications to this paper, much of the realisation of its plans would depend on how SingTel is placed in a Bharti-MTN merger. For now, the company has remained vague about its equity stake in Bharti if the merger with MTN goes through. The company’s spokesperson’s response suggested that the discussions (between Bharti and MTN) are on-going at this stage and, as stated in Bharti’s press release, SingTel will remain a significant shareholder and strategic partner in Bharti post any transaction. The Bharti spokesperson also reiterated that SingTel would continue to be a strategic partner and significant shareholder post transaction.
“Consistent with our approach as a strategic investor and equity accounting for our investments, we will continue to equity account for Bharti in its enlarged form post the transaction if this is successful,” the SingTel spokesperson said.