London: Caught in the middle of the Ambani siblings’ feud, South African telecom giant MTN is mulling walking away from talks for a possible amalgamation with Anil Ambani-led Reliance Communications (Rcom), a report said today.
“South Africa’s MTN is considering walking away from a tie-up with Reliance Communications of India because it fears an acrimonious spat between the Indian telecom operator’s owner and his brother could leave the deal open to legal action,” UK daily Financial Times reported.
While quoting an unnamed person familiar with the talks as saying MTN and RCom could extend their exclusive talks for another two to three weeks after the 45-day period expires tomorrow, the report said, “there is no indication that extra time alone would be sufficient to resolve the feud” between Anil and Mukesh Ambani.
The deal, if fructifies, could create a combined entity worth about $70-80 billion, which would be one the world’s biggest emerging market telecom firm.
While MTN and RCom are said to be working on various deal structures, the FT report said there were “mounting fears” that “none of the myriad deal structures under discussion would insulate the combined company from Mukesh’s lawyers.”
MTN would have to get the legal assurances (from RCom) that they are in a position to defend themselves against a move from Mukesh-led Reliance Industries, the report quoted Morgan Stanley’s telecom analyst Sean Gardiner as saying.
The deal has been clouded under uncertainties since RIL claimed right of first refusal in any controlling stake in RCom and wrote letters to MTN and RCom threatening legal action if its rights were breached. However, these claims are being contested by the Anil Ambani group.
Last Thursday, RIL sent fresh communication to RCOM and MTN saying it was invoking the arbitration clause under the non-compete agreement with ADAG.
“RIL has invoked the provisions of dispute resolution contained in the non-competition agreement dated January 12, 2006, and has invited RCOM to participate in the process of mutual conciliation prior to commencement of formal arbitration,” the RIL statement had said.
The FT report also quoted the person familiar with the situation as saying that “Reliance Communications and MTN had not replied to Reliance Industries’ letters concerning its right.”
Separately, a report in the US financial daily The Wall Street Journal said that MTN and RCOM are unlikely to strike a deal by the time of a self-imposed deadline Tuesday.
“MTN and Reliance Communications are likely to extend their exclusive talks for a few weeks beyond the end of the 45-day period of exclusive talks they entered in late May,” the report said.
Last week, South African financial daily Business Day had said that MTN’s tolerance may be running out for a possible deal with RCOM and MTN’s CEO may walk out if the dispute between the Ambani brothers is not settled soon.
“MTN is an operator with a low tolerance level. It comes from the top, with CEO Phuthuma Nhleko handing out brusque replies if someone poses a question he thinks is gormless,” the report had said.
After RIL’s second letter last week, the Anil Ambani group on Friday asked market regulator Sebi to probe hammering down of shares of RCom and other companies by rivals and charged Reliance Industries (RIL) with attempting to derail the ongoing talks for a deal with South African telecom giant MTN.