Where is the $23-bn telecom Bharti-MTN merger heading?

The $23-billion deal for the merger of Bharti Airtel and South African giant MTN, which would have been the world's largest in the telecom sector, today fell through.

Sunil Mittal-led Bharti called off discussions with MTN citing the South African government's rejection of the proposed merger structure, which would have created the world's third largest telecom company with combined revenues of over $20 billion annually and a subscriber base of over 200 million.

The issue of dual listing of MTN to maintain its identity in the merged company appears to have been the deal-breaker during the tough negotiations lasting well over four months.

Prime Minister Manmohan Singh had strongly backed the deal which he took up with South African President Jacob Zuma at the G-20 Summit in Pittsburgh last week.

While announcing the calling off of the talks, Bharti in a statement expressed the hope that the South African government "will review its position in the future and allow both companies an opportunity to re-engage".

This is the second time in just over a year when Bharti has been forced to abandon talks for amalgamation of the two organisations in a complex deal that also hinged on Indian government's clearance for dual listing.

"This transaction would have been the single largest FDI into South Africa and one of the largest outbound FDIs from India," Bharti statement said, adding "the structure needed an approval from the government of South Africa, which has expressed its inability to accept it in the current form".

Senior management of Bharti, including Sunil Mittal, could not be reached immediately for comments as they are on a annual off-site, most likely in Pataya, Thailand.

After Bharti had called off negotiations with MTN last year accusing the South African entity of reneging on its commitment and presenting a different structure, Anil Ambani-led RCom had entered into negotiations with MTN for a deal.

This was also called off after Anil's elder brother Mukesh Ambani asserted the first right of refusal and

threatened a legal action. As per the proposed structure, Bharti would have acquired 49 per cent shareholding in MTN and in turn MTN and its shareholders would acquire about 36 per cent economic interest in Bharti.

The South African government had demanded dual listing of MTN in order to protect the character of MTN as a South African entity.

While starting the negotiations for the second time in May this year, Sunil Mittal had said "we see real power in the combination and we will work hard to unleash it for all our shareholders."

India Inc feels let down by deal failure Corporate India today felt let down by the failure of the $23-billion proposed merger deal between telecom giants Bharti Airtel and South Africa's MTN but said the south-south co-operation was still alive.

"In this particular proposed deal they (South African government) could have said they will make an exception in their law in terms of dual listing norms," Ficci secretary general Amit Mitra said.

He, however, said there was still scope in South Africa where Indian companies are preferred by "black administration" which today controls the country.

Assocham President Sajjan Jindal described the development as "the most unfortunate". He said the merger between Bharti and MTN would have provided a "golden opportunity" for India Inc to spread its wings in the global business space.

"It is most unfortunate. The MTN deal has been called off despite full support from the Indian government. It was a golden opportunity for India to globalise its wings," he said.

In a consolatory tone, CII director general Chandrajit Banerjee said the MTN deal not going through should not be seen as a dampener.

"India Inc has had many success in the past and in future too we can hope to see some large merger and acquisitions by Indian companies, including the likes of Bharti," he added.

PHDCCI president Satish Bagrodia, however, said: "Indian industry is quite disappointed with the proposed deal being called off. In future Indian companies will be over cautious."

Agencies

Seven-year IT services deal signed by IBM, Qantas

According to a report the outsourcing deal is valued at up to $200 million which could cost up to 178 Qantas workers their jobs

IBM Corp. said that it has signed a seven-year outsourcing contract with Qantas, Australia's largest airline, for the provision of project delivery functions, as part of the airline's improved business efficiency goals.

David Hall, Qantas executive manager of corporate services and technology, said the agreement with IBM will enable a fast transformation, increased efficiencies, and improved customer experience.

"Qantas believes the partnership with IBM will give us access to IBM's scale, strength, expertise, and the latest tools and technologies available in the global marketplace. We are confident that IBM will deliver significant benefits to our business," he said.

Under the contract, Qantas will gain access to IBM's deep research, analytics and business optimization capabilities.

"Qantas' partnership with IBM represents a major step towards the airline's mission to lead and innovate in the competitive airline industry," said Katie Bambrick, IBM Global Business Services Managing Partner for Australia and New Zealand.

"Drawing on IBM's advanced technologies and the airline industry expertise IBM has built over the last half-century, this partnership has an exciting future," said Ms Bambrick.

According to Australian IT the outsourcing deal with IBM is valued at up to $200 million which could cost up to 178 workers their jobs.

Staff at Qantas's project delivery team are set to transfer to IBM as part of the deal. Those who do not accept new employment terms from IBM will be forced to take redundancy, the report said.

Agencies

Sun-Oracle deal gets OK from US Justice Dept

Business software maker Oracle Corp said it has received the Justice Department's approval to move forward with its $7.4 billion acquisition of former dot-com-era star Sun Microsystems Inc.

The deal still needs to get the go-ahead from the European Commission.

Clearance by the Justice Department had been held up over questions about the licensing of Java, a programming language that Sun invented that now runs on more than 7 billion electronic devices around the world, including cell phones and personal computers.

Sun's shareholders approved the deal in July. Another potential antitrust question could surround Sun's MySQL database, an open-source product. Some worry Oracle could make MySQL a lower priority as it tries to boost sales of its market-leading database software.

Sun's performance had been shaky for nearly a decade before Oracle outbid IBM Corp. for the Santa Clara, California-based company in April. IBM is one of Oracle's biggest database software rivals, and is a major Sun rival in computer servers.

The Sun acquisition will give Oracle more control over the development of Java, a key technology used in its products, and also thrust the Redwood Shores, California-based company into hardware, a new area for Oracle.

The Justice Department's approval was expected. Oracle's stock rose 17 cents to $22.11 in after-hours trading, having finished the regular trading session up 16 cents to close at $21.94.

Agencies

Will Infosys-Telstra deal cause job losses in India?

Bangalore-based software giant Infosys will pick up most of IBM Global Services’ multi-million dollar applications support contract with Australian software giant Telstra, after the latter’s deal with the former was scrapped following telco reducing its outsourcing partners from four to two.

According to The Australian, the decision to shift from IBM to Infosys could result in hundreds of job losses locally and in Bangalore, where IBM operates outsourcing centres.

IBM GS staff was told the scratching of the vendor’s software support would represent about 50 per cent of its one billion dollar, six-year deal with Telstra, signed in early 2006.

Telstra’s decision to drop IBM was a big surprise to IBM GS staff, who expected the contract to continue until 2012.

The deal was lost not because of performance issues but because Infosys low-balled the IBM offer, sources said.

Telstra has been reviewing its IT outsourcing contracts with Satyam, EDS, IBM GS and Infosys since last year, when the telco announced it would trim its list of major IT suppliers from four to two in an effort to reduce costs and streamline its providers.

Earlier, Telstra had ended one of its information technology outsourcing contracts with International Business Machines Corp (IBM). It has now roped in Infosys Technologies for the same.

IBM Global Services' multimillion dollar applications support contract with Telstra has been scrapped as a result of the telco reducing its outsourcing partners from four to two, as per an Australian media report.

The decision to shift from IBM to Infosys could result in hundreds of job losses locally and in Bangalore, where IBM operates outsourcing centres, the report said.

The Australian reported that IBM staff were told the scrapping of the vendor's software support would represent about 50% of its $1 billion, six-year deal with Telstra, signed in early 2006.

Less than a week ago, Telstra terminated its IT outsourcing contract with fraud-hit Satyam Computer Services. Telstra is the second major Australian company to do so after The National Australia Bank decided in February to suspend future work with the Indian outsourcer since the disgraced Indian outsourcer's accounting scandal came to light.

The IBM India spokesperson could not be reached for comment while the Infosys communication person said, "We are in our silent period and will not be able to comment on the issue."

Agencies

Nokia, Qualcomm tie up after years in court battles

Top cellphone maker Nokia will use Qualcomm's chips in its advanced cellphones, the firms said on Tuesday, marking a further warming of ties between the former courtroom rivals.

The cooperation gives Qualcomm access to a major share of the smartphone market, while it enables Nokia to further lower production costs.

"In the end of the day Qualcomm needs Nokia as much as Nokia needs Qualcomm," said Gartner analyst Carolina Milanesi.

The deal marks the first time Nokia will use Qualcomm chipsets in its 3G phones, and brings the firms closer together after years of bitter disputes over intellectual property rights and royalty payments.

"We are very very excited about this opportunity," Andrew Gilbert, the head of Qualcomm's European business told the media in an interview. "We are going to compete for as much of their business as we can."

Nokia's key suppliers of 3G chipsets have been Texas Instruments and STMicro, which has spun off wireless chips into a joint venture with Ericsson.

Nokia and the new ST-Ericsson venture said on Tuesday they would cooperate on providing ST-Ericsson's U8500 chips for 3G smartphones using Symbian foundation software.

Nokia said on Tuesday it had tapped also Broadcom , its current supplier of second-generation technology chips, to supply 3G chipsets.

Nokia eyes U.S. Market

Nokia and Qualcomm agreed last July to a 15-year settlement that included a hefty 1.7 billion euro one-time payment from Nokia, ending a three-year legal battle where the firms raised dozens of cases against each other on three continents.

The agreement also comes against the backdrop of an ailing cellphone market, with 2009 sales set to drop as consumers rein in spending on new gadgets due to the economic recession.

Nokia said it would introduce the first model using Qualcomm chipset and Nokia's software in the middle of next year.

The phones would initially be for the North American market and work on third-generation networks and run on the Symbian operating system, the most widely-used smartphone software that is currently controlled by Nokia but will eventually be made royalty-free for all users.

Nokia shares were down 2.2 percent at 9.11 euros on a weaker Dow Jones Stoxx European Technology Index.

"I don't see the markets reacting since the products are expected to be sold only around mid-2010," said Nordea analyst Martti Larjo. "(But) at least the cooperation shows that Nokia is focusing its efforts on the North American market."

Nokia has long struggled in the U.S. market. North American sales dropped 20 percent year-on-year in the fourth quarter, and Nokia's North American market share of some 8.7 percent was well below its global figure of 37 percent.

Agencies