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India’s Bharti Airtel Ltd and South Africa’s MTN Group restarted merger talks to create a major emerging markets telecoms group, a year after previous talks broke down over who would control a merged entity.

Bharti said the potential value of what is a complex deal in which both firms pay cash and stock for stakes in each other, was more than $23 billion.

“The broader strategic objective would be to achieve a full merger of MTN and Bharti as soon as is practicable to create a leading emerging market telecom operator, which today would have combined revenue of over $20 billion and a customer base of over 200 million,” the companies said in separate statements.

Bharti, India’s leading mobile operator, said it would be the primary vehicle to expand in India and Asia, while MTN would drive growth in Africa and the Middle East.

That would make it the world’s biggest non-pharmaceutical deal so far this year, according to Thomson Reuters data. It would also be India’s biggest cross border deal, almost twice the size of Tata Steel Ltd’s near $13 billion acquisition of Britain’s Corus in 2006.

A combination of MTN, worth $27 billion at Friday’s close, and Bharti, valued at $34 billion, would be among the top 10 global industry players based on subscriber numbers. Bharti has nearly 100 million mobile subscribers and MTN, sub-Saharan Africa’s biggest mobile operator, also has about 100 million.

Sanjay Chawla, a telecom analyst at Anand Rathi Securities, said that based on Friday’s close, Bharti was valued at 11 times enterprise value to EBITDA, while MTN was valued at 5 free instant credit reports.5 times.

“Compared to last year, the deal structure looks reasonable and, to that effect, the completion risk is low,” Chawla said.

“Plus (MTN) is a free cash-flow positive, dividend-paying firm. Therefore, it’s a cheaper asset and looks to be a pretty good deal for Bharti,” he added.

Bharti called off talks with MTN last year after the South African firm proposed a new structure that would have seen Bharti become an MTN unit.

MTN then held talks with Bharti rival Reliance Communications, but these also failed.

“I doubt if the merger plan by the two firms that went awry last year will come back to haunt them. One wouldn’t go back a second time unless one is sure,” said Rajesh Jain, chief executive at Mumbai-based Pranav Securities.

Bharti shares rose more than 8 percent in early Monday trade, but later pared gains and were down 0.5 percent at 0720 GMT (3:20 a.m. EDT). MTN shares jumped more than 14 percent.

COMPLEX DEAL

The firms said MTN would take a 25 percent interest in Bharti for $2.9 billion plus new shares equal to about 25 percent of the current shares on issue. MTN shareholders would take another 11 percent of Bharti. 

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