Into Africa: Bharti may take local model abroad

By Devidutta Tripathy and Rina Chandran

NEW DELHI (Reuters) - Bharti Airtel's mooted African expansion will look to franchise a model that has made it the leader in the world's fastest-growing mobile market, and diversify its exposure from an increasingly tough Indian market.

But analysts also see risks in buying into South Africa's MTN Group -- potentially India's biggest foreign acquisition -- with a lack of clarity over Bharti Chairman Sunil Mittal's plans adding to the uncertainty.

Concerns include: How would Bharti fund a deal that could top $20 billion if a bidding war broke out; how would it integrate a similar-sized company and deal with regulators and customers in 21 countries; and will it be distracted from its home market just as significant changes are underway?

"MTN is not a small company, and it's not a cheap acquisition," said Rishi Sahay, director of IndusView Advisors.

"The synergies are difficult to value as they're different networks, different geographies, and they're nearly the same size. So you may have to run it like two independent companies, and Mittal doesn't have much international experience."

Bharti Airtel, valued at around $40 billion and more than one third-owned by Singapore Telecommunications Ltd and state investment agency Temasek, says it is in exploratory talks with MTN, but has not submitted an offer.

The Financial Times has reported Bharti has bid 165 rand per MTN share for a 51 percent stake, valuing MTN at about $37 billion, and has secured $12 billion in financing.

"It is more expensive to raise money today than it was a year ago, but maybe because M&A is cooling off elsewhere, it's a good time for Indian companies to look at opportunities," said S. Subramanian, head of investment banking at Enam Securities.