JOHANNESBURG - Four of MTN's top 25 shareholders would reject a tie-up with India's Bharti Airtel based on terms unveiled this week and other big investors are unsure about the deal to create a telecoms giant.

South Africa's MTN and Bharti have restarted talks aimed at creating the world's third-biggest wireless group with more than 200 million subscribers and combined revenue of $20 billion.

Bharti says the potential value of a complex cash and share swap deal is more than $23 billion and could lead to a full merger of the companies, which have a combined market value of almost $58 billion based on current prices.

But while many investors applaud the commercial logic of a deal that would give MTN and Bharti access to new high-growth emerging markets, boost their buying power and provide financial muscle for further expansion, several MTN shareholders say they are being short changed.

The feeling within the market is that the deal in its current form won't get MTN shareholder approval, said Gavin Joubert, portfolio manager at Coronation Fund Managers, which owns 0.44 percent of MTN shares and is a top 15 shareholder.

One of the issues is that the relative valuation of MTN is significantly cheaper than Bharti Airtel, he added.

The deal would see India's leading telecom group end up with 49 percent in sub-Saharan Africa's biggest operator -- effective control -- while MTN and its shareholders would get around 36 percent of Bharti.

By the time MTN has issued new shares under the deal, the implied premium is less than 15 percent over Friday's close.

One analyst said the proposed transaction values Bharti at 11 times core earnings on an enterprise value to EBITDA ratio, while MTN is worth only 5.5 times.

The pricing of it is horrible, said Hlelo Giyose, portfolio manager at Stanlib Asset Management, a top-25 shareholder with 6.5 million shares, according to Reuters data.

The kind of premium they are giving us is not worth it ... We need close to 40 percent.

RMB, a top-25 shareholder, was also circumspect.

From a long-term strategic standpoint it makes sense, but price-wise, I don't buy it, said an RMB Asset Management portfolio manager, who asked not to be named.

Another fund manager with an MTN stake said Bharti would need to raise its offer quite a bit for it to tender shares.

For me, a 13 percent premium is not sufficient to compensate me for an asset like this, he said.

NO BIG BACKER

None of MTN's major shareholders have publicly endorsed the proposed deal.

MTN's biggest shareholder, South African state-owned pension fund Public Investment Corporation (PIC), told Reuters in an emailed statement it was still analyzing the transaction.

Lebanon's Mikati family, which MTN says has a 9.82 percent stake after the South African firm bought Investcom in 2006 to expand its Middle Eastern footprint, did not respond to phone calls and emails.

Several other top 10 shareholders, including South African fund managers Allan Gray and Sanlam, declined to comment.

Last May, three weeks of talks between Bharti and MTN broke down over who would control the new company.

Some analysts said improved transparency this time signals a greater chance of success, but MTN's share price has traded well below the implied value of about 132-134 rand per share since the new terms were unveiled, suggesting market skepticism.

MTN shares fell 1.6 percent to 122.80 rand by 9:51 a.m. EDT.

Several South African fund managers also dislike the fact that Bharti would pay for part of its stake in MTN with global depositary shares that would have to be counted within the small offshore asset allowance granted by South Africa's strict foreign exchange rules.

It's not attractive on the face of information disclosed so far, said Anthony Sedgwick, investment manager at Polaris Capital, a top-25 shareholder. The market is saying the deal under the current terms is not likely to go ahead.

(Additional reporting by Nicola Leske in Frankfurt and Raji Menon in London; Editing by David Cowell)

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