7/29/2019 Legal and Regulatory Considerations in Bharti Zain Deal

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What are the Legal and Regulatory Considerations in this deal?

1. ODI Regulations Any Indian company that wishes to acquire orinvest in a foreign company outside India must comply with the

Foreign Exchange Management (Transfer or Issue of any ForeignSecurity) Regulations, 2004 (ODI Regulations).

2. Guarantees Regulations : Considering that Bharti Airtel wouldextend a corporate guarantee to the bankers for the loan that hasbeen taken by the Netherlands and Singapore SPVs for financing thetransaction of Foreign Exchange Management (Guarantees)Regulations, 2000 (Guarantees Regulations) would be attracted.

a. According to Regulation 5 (b) of the Guarantees Regulations, a

company in India promoting or setting up outside India, a jointventure company or a wholly-owned subsidiary, may give aguarantee to or on behalf of the latter in connection with itsbusiness; provided that, the terms and conditions stipulated inthe ODI Regulations for promoting or setting up such companyor subsidiary are complied with.

3. Anti Trust Laws Competition Act, 2002 (Competition Act) wasenacted to replace the erstwhile Monopolies & Restrictive TradePractices Act, 1969 and provide institutional support to healthy and

fair competition. The Competition Act seeks to: prohibit anti-competitive agreements including cartels; prohibit abuse ofdominant position; and regulate combinations (mergers andamalgamations, and acquisitions).

The provisions relating to (i) anti-competitive agreements; and(ii) abuse of dominance were made effective from May 20, 2009.However, the provisions relating to regulation of thecombinations are yet to be notified.

The deal with Zain still encountered obstacles, including a dispute about the minority ownershipof Zain's operations in Nigeria, the biggest market in the deal, but Bharti said on Tuesday it hadsettled a dispute with one of Zain Nigeria's minority shareholders, Broad Communications Group.

Oba Otudeko, who controls Broad Communications, will be made chairman of the Nigerianoperations.

Another firm, Econet, which owns 5 percent of the Nigeria unit, has been seeking to overturn a2006 deal whereby Zain -- then called Celtel -- bought a majority stake in Nigerian mobileoperator Vee Networks Ltd, now Zain Nigeria.

7/29/2019 Legal and Regulatory Considerations in Bharti Zain Deal

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Mittal said Econet has had no contact with Bharti, but he did not see Econet posing a problem foroperations in Nigeria.

Econet, however, said in a statement on Tuesday the dispute was not yet resolved and that itwas not party to any agreement between Zain and Bharti.

A source in Bharti said there is a break-up fee clause of $150 million in the deal. If anyparty refuses to complete the deal, it will have to pay $150 million to the other party.