VODAFONE is examining a £20 billion bid for MTN, Africa’s largest mobile-phone operator.

Chief executive Arun Sarin has instructed his in-house acquisition team, led by former UBS banker Warren Finegold, to examine options to buy MTN. The African company was in effect put into play last week after revealing talks to sell a majority stake to Bharti Airtel of India.

The deal would be Sarin’s largest acquisition as chief executive, greatly increasing Vodafone’s exposure to emerging markets, and would represent an alternative route across the booming continent of Africa, after the frustration last year of failing to take control of Vodacom, Vodafone’s existing investment in South Africa.

However, sources cautioned this weekend that any activity was at an early stage and a bid might not emerge. Investment banks have yet to be called in, though Vodafone retains the services of Goldman Sachs.

MTN has 68m customers in 21 countries across Africa and the Middle East. Most of its subscribers are in South Africa, Nigeria and Iran.

Bharti said last week that it was in “exploratory discussions” with MTN. It wants to buy a 51% stake in the business. Priced at about $19 billion (£9.7 billion), it would mark the largest overseas expansion ever by an Indian firm. However, the two sides are still some distance apart on price. In addition, some minority shareholders are said to believe a full takeover would present more value.

Any buyer must gain the support of the Alpine Trust, a vehicle that owns 23% of MTN through the pooled investment of company managers and Najib Mikati, the former prime minister of Lebanon.

Sarin spooked investors in the early months of his tenure by wading into the battle for control of American operator AT&T Wireless after playing down the prospect of big acquisitions.

However, he has since won them over with a string of purchases in fast-growing markets such as India, Turkey and eastern Europe to offset sluggish top lines in mature markets such as Britain and Germany.

“How could they not look at it?” said one industry source. “They may never get hold of Vodacom.”

Vodafone had hoped to strike a deal with its South African joint-venture partner Telkom to lift its 50% stake in Vodacom to 85% for £3.5 billion by the end of last year. However, Telkom, which is part-owned by the South African government, halted talks in November after it could not agree a price for a parallel deal to sell some of its fixed-line assets to MTN.

With little prospect of talks restarting, the stalemate has played on Sarin’s mind. “If you think about the things we have to do in 2008, there are important acquisitions in Asia and Africa that we have to make,” he said in an interview in January.

A deal with Vodacom, South Africa’s largest mobile operator, would have given Vodafone operations elsewhere in Africa. Vodacom has assets in Tanzania, the Republic of Congo and Mozambique.

Little of the continent has fixed-line infrastructure, so mobile companies see strong growth. And as many Africans don’t have bank accounts, mobile operators are also introducing services such as money transfer.

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