Extending talks MTN’s damage control move?

Extending talks MTN’s damage control move?
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First Published: Thu, Jul 10 2008. 01 23 AM IST
Updated: Thu, Jul 10 2008. 01 23 AM IST
South Africa’s MTN Group Ltd is prolonging its embarrassment with Reliance Communications Ltd, or RCom. MTN has agreed to extend talks with its Indian rival, despite appearing to be no more assured that a rapidly escalating legal spat obstructing a potential $80 billion (Rs3.5 trillion) tie-up can be resolved. After publicly engaging with two potential suitors in as many months, MTN won’t save face if its latest talks collapse — now or in two weeks.
It only makes sense for MTN to extend talks if it really believes that Anil Ambani, who controls two-thirds of RCom, can resolve a dispute with his estranged brother Mukesh Ambani, who claims first right of refusal over RCom. However, as the brothers continue to publicly tussle in ways reminiscent of a Bollywood film, a quick settlement looks increasingly implausible. It’s easy to see why MTN wants the deal to work. A successful combination with RCom would likely double its subscriber base overnight and create an emerging market giant, which could compete with the scale of Vodafone Group Plc. Meanwhile, MTN shareholders remain unsure whether the group will end up entangled in a protracted legal battle between the feuding brothers.
MTN’s deadline extension looks more like an exercise in damage control. The group has already fluffed its chances with India’s largest mobile firm, Bharti Airtel Ltd, talks with whom collapsed after MTN found that RCom, India’s second largest, was willing to deliver a more politically appealing structure. MTN played an aggressive card — and Bharti walked away. In hindsight, it now looks like MTN may just have swapped one problematic partner for another.
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First Published: Thu, Jul 10 2008. 01 23 AM IST