South African telco MTN is learnt to have sent feelers to Bharti for reviving talks, if it fails to clinch a deal with Reliance Communications, according to a source linked with discussions between the two companies.

MTN and Bharti Airtel, which were in merger talks in May, but the Indian telco had called off talks after both companies failed to agree on the corporate structure of the combined entity.

The source close to deliberations between Bharti and MTN also added that “the Indian telco was very open to take the discussions with MTN forward if such possibilities existed.” When contacted, the Bharti spokesperson said the “company does not comment on market speculation.”

Last week, MTN and India’s second-largest mobile operator Reliance Communications (RCOM) agreed to “extend their period of exclusivity for talks until July 21.” Therefore, a formal approach by MTN appears unlikely for the time being.

But if MTN has indeed informally sent feelers to Bharti, it would mean that talks between MTN and RCOM may hit a rough patch, possibly over the right of first refusal (RoFR) issue raised by Reliance Industries (RIL).

Of course, it is possible that MTN may have sounded out Bharti in order to keep RCOM on its toes. Meanwhile, there is speculation that RCOM may have presented a new structure to MTN.

According to this, Anil Ambani would transfer a part of his 66% shareholding in RCOM to MTN, thereby allowing him to be the single-largest shareholder in both companies for the time being and hence skirt the RoFR issue.

MTN’s possible renewed interest in Bharti would constitute a dramatic turnaround of events. Two days before talks between Bharti and MTN were formally called off in May end, the South African telco had informally approached RCOM to find out whether it would be interested in a deal. RCOM had agreed then. The shoe may be on the other foot this time.

Discussions between Bharti and MTN had fallen through after both companies had signed a term sheet because MTN’s board had rejected the proposal to merge itself with the Indian telco and instead suggested a structure which would make Bharti a subsidiary of the South African company.

After Bharti’s pullout, MTN has been in exclusive discussions with the Anil Ambani-owned RCOM since May 26 for a potential merger to create a $70-billion telco. However, RIL’s RoFR claim in case of RCOM becoming a MTN subsidiary has resulted a possible slowdown in discussions between the two and sent the Indian company scrambling for new structures.

Meanwhile, reports appearing in the South African media speculate that MTN could look at a “less controversial” deal with Bharti Airtel rather than pursue a potential merger with RCOM. “The original, less controversial merger with Bharti Airtel could be back on the cards,” South African daily The Times said, while adding that MTN was looking for a ‘clean deal’.

“Media frenzy surrounding MTN’s proposed merger with Reliance Communications is probably creating a useful smokescreen to allow it explore opportunities in other countries well away from the spotlight,” another South African daily Business Day reported.

Source:economictimes