Bid to conquer the world
Just what will satisfy MTN? Since the beginning of the year, CEO Phuthuma Nhleko has been mentioned in the company of three of the world’s richest men — but the mobile phone operator has been unable to close a deal to become a global player.
With operations in 21 countries, more than 40m subscribers and a market cap on the JSE of R242,5bn, MTN is attracting the attention of heavyweight players in the world telecom sector — and Africa’s largest cellphone group makes no secret of its global expansion plans.
But it has been unable to reach terms with two suitors — India’s Reliance Communication and Bharti Airtel — in the space of a few months. A deal with either company would have made the new combined entity one of the 10 largest telecom companies in the world — but not even this prize was enough of a lure for MTN.
Its talks with Reliance looked promising, but a family dispute between Anil Ambani (the world’s sixth-richest man) and his brother Mukesh (world’s fifth richest man) collapsed when Mukesh claimed he had the right of first refusal when it came to disposing of shares in the company his younger brother leads.
Since MTN ended talks with Reliance, there has been speculation that it will do a deal with Carlos Slim Helú (world’s second-richest person), who runs the South and Central American-based Telmex, Telcel and América Móvil.
But a move into the Americas is unlikely, says Kristoff Puelinckx, managing partner of emerging-markets telecom advisory firm Delta Partners.
He says it makes more sense for MTN to do a deal with operators in Africa, Asia and Eastern Europe than go into a market in South America, which it does not know well. “A move into the Americas is about two to three steps away,” he says.
For now, the group is focused on getting into markets where the operators it is after can support its business model.
Puelinckx says the global telecom sector is set for consolidation, but does not expect large Western companies like France Telecom to be taking over MTN. It is more likely that MTN will take over another developing-market operator than become an acquisition target. “They have a chance of becoming a large telecom on their own,” he says.
Whatever group MTN concludes a deal with, Puelinckx says one thing is for sure: the deal “will make business sense”, as MTN has a track record of not throwing good money into bad ventures — like paying too much for a telecom licence.
Frost & Sullivan analyst Lindsey McDonald agrees, and points to MTN’s US5,5bn takeover of Middle East-based Investcom. “With one move it was in 11 countries,” she says.
Will MTN still be recognised as an SA company after it concludes a deal? Puelinckx says it is difficult to say what kind of ownership arrangement will satisfy MTN, but he would not be surprised if a nonnegotiable for the group might be management control. “I expect MTN to be in the driving seat and not to sell out.”
Puelinckx and McDonald do not see the MTN brand disappearing anytime soon if it is the subject of a takeover, as it is about to get a boost from its major sponsorship of the 2010 soccer World Cup in SA.
Puelinckx says he will not be surprised if the football spectacular turns it into a global brand, and points to how Korean electronics group Samsung used its association with the Olympics to boost its global standing.
What does MTN say about its expansion plans? Nothing for now, but the group says it will answer these questions at the interim results in a few weeks’ time.
MTN is not known for warm relations with the media. When a journalist recently asked Nhleko why he does not speak more frequently to the media, he turned away without responding.
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