Cell users may applaud Bharti buy
Perhaps this general atmosphere of national pride has encouraged the view that Bharti has little to offer MTN.
In a sense, the talks about a bid even strike one as a bit cheeky since Bharti’s profitability is lower and it is only larger in market capital partly due to India’s pumped-up stock exchange, which is where foreign ownership is limited.
The argument that a merger has little to offer MTN is founded on the notion that their markets are not contiguous and that measuring the cost of equipment, such as base stations, suggests that both are already getting close to premium discounts.
Hence there is little to be gained from economies of scale or geography.
But it is worth taking a closer look because it may be that Bharti does have something to offer, something that MTN’s customers might like — it charges less.
Bharti operates in a tougher environment where cellphone rates are generally lower and competition is much higher.
Consequently, there is an argument that the Indian model could help MTN.
MTN’s penetration is generally pretty high, above 30% in most markets. But its average use per subscriber is low by comparison.
In SA, it is about 106 minutes, 52 minutes in Nigeria and 92 minutes in Iran. The comparison with Bharti’s subscriber base is staggering. Bharti has a usage rate of 507 minutes per subscriber.
As a result, some Indian analysts suggest that MTN’s capex intensity is nowhere near as high or as consistent as Bharti’s.
So corporate nationalists might frown on a buyout of MTN, but customers could have a different opinion.
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