>BHARTI AIRTEL LIMITED (JP MORGAN)

Media reports of revision in MTN offer, Looks neutral for Bharti - ALERT

• Bloomberg reported yesterday that the terms of Bharti-MTN deal have been revised with Bharti agreeing to pay more cash for the deal than decided earlier. As per the news article, Bharti would pay US$ 10 billion in cash and US$ 4 billion in stock (total consideration of US$ 14 billion) against the earlier deal terms of US$ 7 billion in cash and US$ 6 billion in stock. The incremental cash payout of US$ 3 billion would be neutralized by Singtel paying US$ 3 billion to Bharti and taking a stake in Bharti as per media reports.

• Bharti and Singtel have denied the media reports and stated that talks are still on and would be consummated by Sep 30, 2009.

• Implications: The new deal terms, if implemented, would largely be neutral for Bharti as it would effectively swap the Bharti GDR offering by cash from Singtel. It would also not have a material impact on our EPS analysis – we continue to believe that the deal is largely EPS neutral
for Bharti. From a sentiment perspective, we believe this kind of arrangement would actually be positive for Bharti stock as it would remove the overhang of MTN acquisition price.

• Investment view: We are fundamentally cautious on the sector and Bharti due to increasing competition. However we do believe that a positive consummation of MTN acquisition (without significant increase in deal price) would be positive for Bharti stock in the near-term. Valuations for Bharti are no longer demanding, in our view.

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