:: Editorial

Bharti-MTN: Let it be a wake-up call

Oct 03 : The collapse of the proposed Bharti Airtel–MTN merger is akin to the flop of a big-banner movie, with equally devastating sentiments. The actors were marquee names, with Bharti the biggest telecom player in this country and MTN a jewel in South Africa’s crown which that country was simply not prepared to sever links with. There is considerable speculation about business competitors having floated the demand for "dual listing" of the merged entity (in both Indian and South African exchanges) when the deal was believed to be going smoothly, because from that point on it was evident that there was no way it could go through. "Dual listing" would require India to change its laws and regulations on capital account convertibility — virtually impossible as it would mean jettisoning the phased roadmap in that direction and put the country at financial risk. More important, there was no way the Indian government could change the laws overnight for the sake of one company, no matter how large.

It is, however, because some very big players were involved in the collapse of this mega-merger that it should serve as a wake-up call for the government, the financial institutions and Corporate India on the urgent need to modify and finetune our laws in line with the needs of changing times. Cross-border deals are inevitable not just because of globalisation, but also as the relative positions of Indian entrepreneurs and their overseas counterparts is rapidly changing. Due to their intrepid thinking, ability to think big, global ambitions and the financial health of their companies, Indian entrepreneurs are better placed than ever to take over foreign companies that may be equally big or bigger but are in a financially weaker position. We have seen this in the spectacular instances of the Tatas taking over the steel giant Corus, and later iconic brands such as Jaguar and Land Rover. There was also Lakshmi Mittal taking over the ailing European steel giant Arcelor. All these deals happened amid huge emotions, which often took on racial overtones. The world now has no choice but to accept that Indian businesses are in a position to reverse the old order, where only the Anglo-Saxons did all the taking over and were never themselves taken over by Indians. They are still fighting the takeover of iconic brands by the Arabs, Japanese and now the Chinese. With Indian businessmen now on the prowl, there is yet another dimension to their woes.

Issues such as "dual listing" to maintain the national identity of companies, capital account convertibility and global footprints require an understanding of the laws in each country, particularly where governments have a large role to play. All these issues now require a different approach. Changes in national laws must, of course, be in each country’s interest, for no government can take the risk of endangering its financial system. The financial collapse witnessed in the United States and Europe in the past year, which had devastating consequences for the rest of the world, is a warning signal about the direction not to go. "Dual listing" could well open a Pandora’s box, going far beyond the matter of capital account convertibility. There would be the question of regulatory oversight: the Securities and Exchange Board of India (Sebi), for instance, would not enjoy any jurisdiction in South Africa in the event of anything going wrong. Entrepreneurs, therefore, will need to finetune their merger and acquisition strategies. It’s not as simple as it looks, and not just a matter of give and take. And it is not only in emerging economies like South Africa that emotion can play a decisive role.