Aug. 20 (Bloomberg) -- Bharti Airtel Ltd. and MTN Group Ltd. extended for a second time talks on a merger that would challenge Vodafone Group Plc’s push into India and Africa.

“No decision or agreement to acquire any shares or implement the potential transaction,” has been made, New Delhi- based Bharti said in an e-mailed statement, adding the deadline for talks had been set at Sept. 30. “The discussions may or may not lead to any transaction.”

Bharti Chairman Sunil Mittal faces the task of winning over MTN’s shareholders who say the Indian company’s offer isn’t enough for them to approve the estimated $23 billion merger. The second one-month delay pushes back the potential formation of a mobile-phone carrier with annual sales of $20 billion and 200 million wireless subscribers from Johannesburg to Mumbai.

“We’d like the talks to conclude as soon as possible,” Theo Maas, who helps manage $3.5 billion in investments including Bharti shareholder Singapore Telecommunications Ltd. at Fortis Investment Partners, said by phone from Sydney. “MTN is probably a good merger partner.”

Singapore Telecom, Southeast Asia’s largest phone carrier, owns about 30 percent of Bharti.

Bharti fell 1.3 percent to close at 400 rupees in Mumbai trading, narrowing the stock’s advance this year to 12 percent. The shares have underperformed the benchmark Sensitive Index’s 56 percent increase. MTN declined 1.3 percent to 125.50 rand in Johannesburg trading, valuing the company at $29 billion.

Price Negotiations

MTN is pushing Bharti to raise its offer for the South African company by more than $1 billion, the Wall Street Journal reported on Aug. 14, citing people familiar with the situation.

Bharti, India’s biggest wireless operator, offered 86 rand ($10.8) plus 0.5 Bharti shares per MTN share for 49 percent of the South African carrier, while Africa’s largest mobile-phone company and its shareholders planned to acquire 36 percent of Bharti, the two companies said on May 25.

The deal may be completely restructured, the Hindustan Times reported today, citing people it didn’t name.

Some MTN directors want the deal to be reorganized to create more value for the South African company’s shareholders, the newspaper said.

“Preferably I would love Bharti as a standalone company,” Maas said. “As long as they can define the price range that they’ve been discussing, I’m pretty happy with that as well.

Bharti needs to pay more for MTN, Anders Ronnebaek, a senior portfolio manager at Sydbank A/S in Denmark, said on Aug. 3 after the two carriers announced they’d extended talks until the end of the month. Ronnebaek, who helps manage $1.2 billion in emerging markets investments including MTN, said he wouldn’t tender his shares at the price currently offered.

Challenge Vodafone

Bharti and MTN plan to spend about $7 billion this year to extend their reach in markets from the Cape of Good Hope to the Himalayas covering territories that gave almost 90 percent of Vodafone’s new users in the quarter ended March 31. Vodafone had more than 315 million users at the end of June.

Mittal, who aims to use the combination to boost sales overseas as revenue growth slows at home, is trying to seal a merger with the African company for the second time in as many years. He needs the backing of 75 percent of MTN’s holders for the transaction to succeed. Talks broke down last year after differences over control.

At least four of MTN’s top 25 shareholders will reject an offer from Bharti, Reuters reported May 27, citing the investors. Coronation Asset Managers, which holds about 5 percent, said it rejects the initial proposal.

Overseas Drive

MTN Chief Executive Officer Phuthuma Nhleko has been looking to expand in markets outside the continent and said in March the company wanted to make a “meaningful” acquisition this year. Africa’s biggest wireless provider last year failed to close deals with Bharti and its nearest Indian rival Reliance Communications Ltd.

Nhleko has driven the company’s expansion north into 21 countries throughout the continent and the Middle East, covering a region with a combined population of more than 500 million people. In April, MTN crossed the 100 million-customer mark as it added users in Nigeria and Iran.

The combined operation will help Mittal’s Bharti increase overseas sales at a time when Reliance and Vodafone are narrowing its lead in India. Competition is also intensifying with the entry of more foreign rivals including Japan’s NTT DoCoMo Inc. and Norway’s Telenor ASA.

Subscriber Additions

Bharti added a record 8.44 million users last quarter, 60 percent of them in rural and semi-urban areas, CEO Manoj Kohli said July 23. The additions boosted the operator’s total wireless subscribers to 102.4 million, more than the combined populations of Spain and the U.K.

Vodafone’s Indian unit and Reliance added customers at a faster pace in April and May, according to figures from India’s Telecom Regulatory Authority, to increase their market shares to 18 percent and 19 percent respectively, while Bharti’s proportion was unchanged.

Bharti and MTN will need to clear regulatory hurdles in India and South Africa.

A deal may face fewer hurdles than Vodafone’s purchase of a controlling stake in Vodacom Group Ltd. The Congress of South African Trade Unions, the country’s largest labor federation that filed a lawsuit against the Vodacom deal, said May 27 it doesn’t plan to block a MTN-Bharti transaction. India’s Finance Minister Pranab Mukherjee on May 26 termed the two carriers’ proposal to combine a “welcome move.”

“Obviously it’s a very complex situation, both with the South African government and Indian government being involved,” Maas said.

To contact the reporter on this story: Harichandan Arakali in Bangalore at harakali@bloomberg.net

Last Updated: August 20, 2009 06:27 EDT