The last thing that the complex negotiations between India's Bharti and South Africa's MTN Group to create the world's third largest mobile phone company needed is more complexity. The existing deal involving an intricate mix of cash and stock is further complicated by currency fluctuations and diverging growth rates between the maturing Indian market and the wide-open African one.
But if a third company, Zain of Kuwait, succeeds in starting up a full-scale bidding war for itself, the Bharti-MTN deal could come off the rails and fall apart. Zain's CEO told Kuwaiti daily Al-Rai on Monday that it is in talks with three major, but so-far unnamed telecom firms, including one from India. Last month, Zain said it was reviewing the possible sale of its far-flung African operations after French conglomerate Vivendi called off talks to buy a majority of Zain's African business. A Vivendi spokesman says nothing has changed since then. There's no word yet from other obvious suspects -- France Telecom or Vodafone -- on whether they are interested.
The most likely Indian bidder for Zain looks like Reliance Communications, India's distant No. 2 mobile operator to Bharti. There's history here, as Reliance tried to nab MTN a year ago. That move came after Bharti's first try to strike a deal with MTN, South Africa's second largest operator, fell apart over which company's management would end up controlling the combined entity.
At least temporarily, the only two parties we can rule out as bidders for Zain are Bharti and MTN. The two would be entirely likely candidates, except that they remain locked in exclusive talks with one another until the end of August. Zain's assets make it an obvious alternative should Bharti and MTN fail to make their belaboured third effort to strike a deal work after more than a year of trying.
There may be too much sheer complexity in merging India's most successful company with the diverse strengths of MTN, a big player from South Africa to Nigeria to Iran and Afghanistan. Both companies have corporate egos to match their roughly US$30 billion market capitalizations.