Where is the need for Airtel to do the MTN deal?

Where is the need for Airtel to do the MTN deal? Where is the need to become global? The objective of any company is to make money for its shareholders and not become global or big. Big does not necessarily mean better or more profitable as most people tend to think.

I read somewhere that Sunil Mittal was determined to make the deal go through and that he doesn’t like losing. This deal is going to get Airtel into trouble. Why? Simply because there is no need to go through the transaction. Two, the transaction will not increase shareholder value. In fact it might decrease the shareholder value because of inefficiencies that may set in because of its size. Third, its a complicated and risky transaction. A number of governments and regulations are involved. Fourth, one of the parties is bound to end up paying more and that will be Airtel. Past record shows that MTN is not easily acquirable and most probably Airtel could end up paying more because of Sunil Mittal’s ego. In case you didn’t know, one of the major reasons for the failure of mergers and acquisitions is that of the CEO’s ego.

Recently, I also read that Airtel may have to pay more as well as increase the cash component of the deal. If Sunil Mittal ego comes into play, he may just end up doing so. Such a step may not end up as the best deal for Airtel’s shareholders even though Sunil Mittal’s ego may be satisfied.

Today, Airtel is doing well from stakeholders point of view and it should stick to its business.

Avinash Narula

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