South Africa's MTN is in talks with a group of lenders to secure a $3.5 billion (Dh12.85bn) syndicated loan to back its proposed merger with India's Bharti Airtel, said banking sources close to the deal.
The two telecom companies are in exclusive talks over a deal that could lead to a full merger, creating the world's third biggest wireless group with more than 200 million subscribers and combined revenue of $20bn.
Analysts said the fact the company was seeking financing may indicate the talks are progressing ahead of a July 31 deadline. "This just shows an intent on MTN's part to ensure that they fulfil the conditions necessary for the proposed merger to go-ahead," said Chris Wood, a fund manager at Prudential Portfolio Managers.
MTN shares shares closed 0.35 per cent higher at R129.90 (Dh59.21) by 1504 GMT, in line with 0.22 per cent firmer JSE Top-40 index of blue-chip stocks.
Bank of America-Merrill Lynch and Deutsche Bank are advising MTN on the proposed merger.
"The loan means they've got banks on their side willing to lend the money to do the deal. I don't think MTN will struggle to raise funding for the deal. Their gearing and debt are pretty low," said a Cape Town-based analyst.
Africa's biggest mobile phone operator by subscribers, and India's leading cellular firm have agreed to talk only to each other until the end of July. Some analysts said they did not expect a deal to be clinched by then.
"They will probably update shareholders on progress and we might see some change in the valuation, but I don't think it will be a done deal," said a Johannesburg-based analyst. Bharti and MTN are mulling over an initial deal worth more than $23bn, under which Bharti would pay cash and shares to end up with 49 per cent of MTN, after MTN pays cash and stock for an effective 36 per cent stake in the Indian company.
Even if MTN and Bharti agree on a proposed transaction, shareholder approval would be required and several major MTN shareholders have said they would reject a tie-up based on terms unveiled so far.
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