Mumbai: Bharti Airtel said late on Wednesday it and South Africa's MTN had called off talks for a planned tie-up due to the inability of the South African government to accept the deal in current form.
Bharti said it hoped the South African government would review its position in the future and allow both companies to re-engage.
Bharti and MTN revived merger talks in May, a year after previous talks broke down over who would control a merged entity. A merger would create an emerging markets giant with more than 200 million customers across India, Africa and the Middle East.
The talks had been extended twice and the present deadline was until Wednesday.
The deal faced scrutiny from regulators and politicians. South Africa is eager to retain MTN's national character and had approached Indian authorities to consider a dual-listed entity, a structure Indian laws currently do not allow.
South African mobile phone operator MTN declined to comment on a statement by India's Bharti Airtel that tie-up talks have been called off, saying it will issue a statement later on Wednesday.
"We will send out a statement later on," MTN spokeswoman Nozipho January-Bardill said.
Chief Executive of K.R. Choksey Shares and Securities, Mumbai Deven Choksey said, "Bharti wanted to expand their footprint globally, but that just doesn't seem to be happening right now. But this is not the end of the story. They probably have to look at something smaller than MTN or some other region to enter."
"The deal being called off is a blessing in disguise for Bharti shareholders as the company would have had to borrow a lot, and Bharti's earnings per share would have been diluted by 5 to 8 per cent."
The Secretary General of the Federation of Indian Chambers of Commerce and Industry (FICCI), Amit Mitra said to CNBC TV18, "Let's not be depressed, the South African economy is still very open. We need to go in there. I know that there are companies sitting in South Africa, selling their products, and as far as investing in a big way is concerned, we should not shy away. This was a special case where both socio-psychological and regulatory (issues) could not be sorted out. We cannot give up South Africa as a great partner in future."
Some experts said they had seen it coming.
Telecom Analyst, Stanlib from South Africa, Hlelo Giyose said, "The deal was difficult in its current form. I'm not surprised it did not go through."
Telecom Analyst, Macquarie Shubham Majumdar said to CNBC TV18, "I think MTN was clearly one of the most attractive assets that you had from Bharti's perspective."
"I think there are very few opportunities of the size, and more importantly scale of MTN globally at this point in time. I think it would be much smaller businesses and footprints that are up for grabs in the global emerging markets telecoms space from here on for Bharti."
MARKET REACTION
MTN shares fell as much as 3.49 per cent to 119 rand after news
South Africa's rand fell as much as 2.56 per cent to 7.62 against the dollar after the news, according to Reuters data. extended losses against the dollar to 7.58.
Ahead of the news, shares in Bharti closed 0.1 per cent lower in a market that rose 1.6 per cent.
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