Bharti & MTN work on finalizing deal; issues linger

By Narayanan Somasundaram

MUMBAI (Reuters) - India's Bharti Airtel (BRTI.BO: Quote, Profile, Research) and South Africa's MTN (MTNJ.J: Quote, Profile, Research) hope to finalize by mid-September a deal that could lead to a full merger, with the Indian firm adding another adviser and getting closer to lining up loans, three sources said.

The telecoms firms have extended exclusive talks until the end of September, and the sources said a proposal could be ready to be placed before shareholders and regulators before then.

Unresolved differences over valuation and management rights are still a risk, even as a broader consensus on the need for a sweetener from Bharti and other structures has emerged.

In a sign that the talks, announced in late May and extended twice, may be gathering momentum, Bharti has shortlisted eight banks for a five-year offshore loan of up to $4 billion, Reuters Basis Point reported.

Standard Chartered, ANZ (ANZ.AX: Quote, Profile, Research), Barclays Capital (BARC.L: Quote, Profile, Research), Bank of Tokyo-Mitsubishi UFJ, BNP Paribas (BNPP.PA: Quote, Profile, Research), Citigroup (C.N: Quote, Profile, Research), DBS (DBSM.SI: Quote, Profile, Research), and State Bank of India (SBI.BO: Quote, Profile, Research) are the lenders on the short list, Basis Point said.

Bharti has also hired Barclays (BARC.L: Quote, Profile, Research) recently as a co-adviser on the deal, alongside Standard Chartered (STAN.L: Quote, Profile, Research), banking sources said. Deutsche Bank (DBKGn.DE: Quote, Profile, Research) and Bank of America Merrill Lynch (BAC.N: Quote, Profile, Research) are advising MTN on the deal.

In another possible sign of progress, Bharti Chairman Sunil Mittal and MTN Group Chief Executive Phuthuma Nhleko met the Indian finance minister and corporate affairs minister earlier this week, officials said.

"Things are falling into place. Broad consensus is emerging on valuation and management sharing. Now we need to clear up the finer points," one source with direct knowledge of the deal said.