After Reliance failure, MTN could still target Indian market

July 23rd, 2008 - 2:04 pm ICT by IANS  

By Fakir Hassen
Johannesburg, July 23 (IANS) South African telecom giant MTN suffered a setback with a four percent drop in its share price Monday after a potential deal with Reliance Communications was called off on Friday, but the company will bounce back and could well make a third foray into India with smaller companies, analysts here said. The possible tie-up with Reliance Communications and earlier the possibility of teaming up with Bharti Airtel saw the MTN price shoot up to 160 rands at one stage, but on Monday it dropped to 125 rands.

But analysts called this a market correction, expressing confidence that the biggest mobile phone company on the African continent would continue to look for partnerships, including deals with smaller companies in India, although none were named.

MTN would only say that it still had a clear vision to be the leading operator in emerging markets, but analysts speculated about countries on both sides of the oceans that straddle South Africa.

Lindsey McDonald, an ICT analyst at Frost and Sullivan, told the daily The Times here Tuesday that Latin America was a firm prospect, while Rajay Ambekar, a telecoms analyst at Cadiz Asset Management, said the subcontinent overall might be targeted.

“I think the key thing for MTN is that India is a very attractive market, and there is no doubt that it is going to be difficult now (to enter that market),” Ambekar told the daily The Times.

Ambekar also told the Afrikaans daily Beeld that the MTN share price had dropped so drastically because those who sold had expected MTN to gain exposure to the highly lucrative Indian market through Reliance, and earlier through Bharti.

“I think MTN will still be on the lookout for acquisitions in India, but probably also outside that country (possibly Pakistan and Bangladesh).”

But while analysts are speculating about possible MTN deals and predicting that the company will announce another potential deal soon, fund managers here are advising exactly the opposite for MTN in the wake of the Reliance deal, scuppered because of a dispute between the Ambani brothers that could have caused long delays in finalising any agreement.

“MTN needs to restore confidence and focus on the business for a while, Metropolitan fund manager Sisa Refusa told the daily Citizen.

Analyst Paul Theron from Vestact agreed with this sentiment: “(MTN) has plenty of traction in the current business. They should probably get back to basics.”

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