In 1995, a U.S. telecommunications company, SBC, spent $90 million for a 15.5 percent stake in MTN, then a small mobile operator in South Africa. Now MTN, with nearly 70 million customers across 21 countries, has again drawn the interest of outside investors. The most visible recent bidder, Bharti Airtel, walked away from the negotiating table Saturday, but that spot was quickly filled by another Indian company, Reliance Communications. Reliance executives are speaking with MTN about a tie-up, two executives briefed on the negotiations said Sunday. Putting a deal together will not be easy. Reliance's market value of $27.5 billion is about $10 billion less than MTN's, and it has about 20 million fewer customers. MTN's management balked at a takeover by Bharti, proposing ultimately that MTN become the parent company instead. Reliance, a publicly traded unit of the $75 billion conglomerate controlled by Anil Dhirubhai Ambani, is not likely to want to take a subsidiary role. Nonetheless, Reliance is not the only company interested in MTN. But unlike the situation 13 years ago, no U.S. operators are looking to buy this time. Instead, bankers, analysts and news reports include a handful of nascent mobile powers based in emerging markets, as well as European telecommunications companies hoping to increase their presence in these fast-growing countries. The breadth of interest in MTN - and the possibility that two companies focused largely on emerging markets might produce a blockbuster telecommunications merger - reflects a new order in the mobile industry. "The focus of the wireless business is shifting rapidly from the developed Western markets to the developing world," said Madhusudan Gupta, an analyst based in Singapore for the research firm Gartner. A combined Reliance and MTN would have about 116 million customers, just below T-Mobile, the wireless subsidiary of Deutsche Telekom, which has about 120 million, and Orange, part of France Télécom, which has about 115 million subscribers. Four of the top six mobile companies in the world would be based in emerging markets, including China Mobile, China Unicom and América Móvil of Mexico. And the other two - Vodafone, based in England, and Telefónica O2 of Spain - have extensive emerging market operations in Latin America and Asia. If MTN and Reliance were to get together, the alliance would dwarf the largest operator in the United States, AT&T Wireless. It has 71.4 million customers and would rank only 11th worldwide, according to subscriber figures reported by the companies. Although U.S. mobile operators were active investors in emerging markets during the 1990s, many of them quickly exited, a trend that accelerated after the plunge in telecommunications and dot-com stocks in 2000. SBC, now a part of AT&T Wireless, sold its stake in MTN after only two years, in 1997. "Many big U.S. telcos eventually lost interest in these markets: They were too small," said Robert Chaphe, who was chief executive of MTN from 1995 through 2002 and is now semiretired and living in Florida. "Now U.S. telcos see more opportunity closer to home. After all, risk ratios are lower in Kansas than in Africa." The caution from U.S. companies has left the development of what were largely untapped markets to Europeans and homegrown companies in emerging markets. India, one of the fastest-growing mobile phone markets in the world, has quickly spawned some telecommunications giants like Bharti and Reliance, which are eagerly looking overseas. John Gole, an analyst in Prague with International Data Corp., said recent and rapid economic growth in India, China and Gulf countries had created a new breed of regional mobile operators. They include companies like Orascom of Egypt, with 71 million customers in Africa, the Middle East and Asia; Etisalat, based in Abu Dhabi, with 6.6 million customers and 10 operators in Africa; and Zain Group of Kuwait, with 45.7 million customers and 22 operators in Africa and the Middle East. "These booming economies and a general economic liberalization have led to the creation of new competitors with the means and experience to expand in emerging markets," Gole said. MTN and Reliance have been skillful at generating profits from customers who typically spend very little for mobile service - less than $20 a month at MTN and less than $9 at Reliance, based on their latest quarterly reports. That compares with $54 a month at Verizon Wireless in the United States, according to a quarterly report from Vodafone, which owns a 40 percent stake in Verizon. Reliance earned a profit of $1.4 billion on $4.8 billion in revenue in the year that ended on March 31. MTN had a profit of 11.9 billion South African rand, or $1.6 billion, in 2007 on revenue of 73.1 billion rand. Reliance has recently expressed serious interest in Africa. Through its subsidiary, Reliance FLAG, the company is investing $1.5 billion to lay a submarine fiber optic cable to Africa. In February, the company bought a small Ugandan telecommunications company and said it planned to invest about $500 million in the market in the next five years to provide mobile, Internet and broadband. Nozipho January-Bardill, a spokeswoman for MTN, said Sunday that it could not comment on either Bharti or Reliance. "Our shareholders will be informed tomorrow about what is happening when the market opens," she said. There are a lot of risks for any partner with MTN, analysts say. Andre Wills, managing director at Africa Analysis, a wireless industry consulting firm in Centurion, South Africa, said, "You need to have a significant understanding of the African operating environment and the challenges of working across all of these different regulatory environments." But Africa also offers significant growth prospects, analysts say. At the end of last year, 270 million people in Africa had cellphones, while there were only 30 million fixed-line phones, Wills said. By 2012, Africa will add 180 million new mobile users, bringing the total to 450 million, he forecast. If Reliance were to move into Africa, it could raise the stakes for international investors like Vodafone, which has a subsidiary in Egypt and operations in seven other African countries; Orange, which owns stakes in operators in 13 African countries; and Portugal Telecom, which has operations in Angola and Morocco. "Something has to happen" with MTN, said one emerging-market banker whose firm was working with a third telecommunications company, which he would not identify, that hoped to jump in, should MTN and Bharti reach an agreement. "They're all looking at it," he added, referring to leading international mobile operators. News reports have speculated about possible interest in MTN from Vodafone, which owns 50 percent of Vodacom, another South African operator, as well as from Deutsche Telekom and VimpelCom, which is based in Russia. Vodafone executives have said that the company is not planning any move on MTN. Deutsche Telekom and VimpelCom declined to comment. Africa, where 29 percent of the population own a cellphone, according to Gartner, is not the only promising emerging market, of course. In India, market penetration is 34 percent, well below levels in the United States, at about 70 percent, and Western Europe, at more than 90 percent. Vodafone recently acquired Hutchison Essar of India for $11.1 billion. But many of the recent acquisitions in other emerging markets have been cross-border deals. Examples include the $5.5 billion purchase by MTN in 2006 of Investcom, a mobile operator based in Beirut with business in eight countries in Africa and the Middle East; the Etisalat purchase during the past year of an 82 percent stake in a west African operator, Atlantic Telecom; and the $3.7 billion purchase by Qatar Telecom in 2007 of a controlling stake in Wataniya Telecom of Kuwait. "It is the emerging market operators that are now on the move," said Hashim Omran, an equities manager at EFG-Hermes Asset Management in Dubai, a unit of the largest bank in Egypt. Source: International Herald Tribune