By Costas Paris and Se Young Lee 
   Of DOW JONES NEWSWIRES 
 

SINGAPORE (Dow Jones)--Bharti Airtel Ltd. (532454.BY) is currently offering shareholders of South Africa's MTN Group Ltd. (MTN.JO) roughly $13.1 billion in cash and shares for a 49% stake and the two sides are close to an agreement, people familiar with the matter say.

However, there is no certainty MTN shareholders will back the deal.

"The concern is that MTN holders may insist on a higher offer by Bharti. If they are convinced by the management, we will have an agreement by mid-September," said a person familiar with the situation. "It will become more clear in the next few days. The offer may change in the end."

Shareholders holding a combined 75% in MTN must approve the deal.

The person said Bharti is considering a small sweetener from its current offer but there is not much space to maneuver as the South African rand has gained against the U.S. dollar since the revival of the talks in May.

Since May 15, the rand has risen 9.2% against the U.S. dollar, trading at ZAR7.86 as of 0502 GMT. The transaction will be done in U.S. dollars.

At current prices, Bharti will pay around $7.4 billion in cash. MTN shareholders will also receive Bharti global depositary receipts - 1 GDR per two MTN shares - that are worth about $5.7 billion in total.

Bharti has lined up about $4 billion in loans from eight banks to help finance the deal, said the person.

"Bharti has already increased the cash portion, but MTN holders want around another billion, mostly in cash. That's the sticking point," the person said. "But the signals from MTN is that their shareholders will eventually go along with a smaller premium."

A second person said that MTN must mainly convince the Public Investment Corp., a powerful body controlled by the South African government that holds more than a 20% stake in the company, to accept the deal.

PIC is perceived to act on behalf of the government.

Lebanon's Mikati family, which owns 10% of MTN, has already said it backs the deal.

The second person said MTN is now offering Bharti around $10.5 billion for a 36% stake in the Indian operator. The company said in May that $2.9 billion will be in cash, so the remaining $7.6 billion will be in shares.

The total value of the deal amounts to $23.6 billion, which is close to the $23 billion figure announced by the two companies in May.

The first person said backing by Bharti's shareholders is not an issue as the founding family holds more than 45% and Singapore Telecommunications Ltd. (Z74.SG) holds another 30%. The Indian company also needs approval by 75% of its investors and SingTel supports Bharti in the transaction.

A third person told Dow Jones Newswires that SingTel is considering buying Bharti GDRs from MTN shareholders in order to keep its position in the Indian company close to its current level of 30%. Analysts have estimated that SingTel's stake will be reduced to about 19.4% based on the terms disclosed so far.

Citigroup said in a report that the GDRs will represent about 11% of Bharti's outstanding shares. While SingTel would be able to preserve its stake at current levels by buying all of them, the report said SingTel may need to raise equity to pay for all the GDRs.

If the marriage works out, it will create the world's third-largest mobile phone operator by subscribers, with over 200 million users.

The two companies extended earlier this month their exclusive talks to Sept. 30.

BANGALORE (Dow Jones)--India's Bharti Airtel Ltd. (532454.BY) and South Africa's MTN Group Ltd. (MTN.JO) have discussed threadbare most of the terms of a deal to form a merger, a CNBC TV-18 report said Thursday, citing unnamed sources.

The two companies, however, have yet to finalize issues such as the board structure after a merger, the report said, without elaborating.

Earlier in the day, Bharti Airtel and MTN said they have extended their exclusive merger talks for the second time to Sept. 30.

"Discussions between the parties regarding the potential transaction continue to progress satisfactorily and the parties have accordingly agreed to extend the exclusivity period until Sept. 30, 2009," Bharti Airtel said in a statement, without giving a reason for the extension.