Mumbai / New Delhi: Reliance Communications Ltd, or RCom, is close to signing a so-called term sheet with MTN Group Ltd—the African phone firm it is in merger talks with— even as it recently got hit with a Rs200 crore claim by the Maharashtra government, adding to mounting potential legal and regulatory distractions ahead of its proposed big merger that could create a global telecom giant with some 115 million users.
A term sheet is a non-binding agreement setting forth the basic terms and conditions under which a deal such as a merger will take place.
Mint has confirmed that the Maharashtra government has asked Giga Solutions Pvt. Ltd, a unit of the Mumbai-based phone company, to pay some Rs200 crore as charges for the right of way granted to it for laying broadband and other cables.
Giga Solutions, which confirmed the letter from the state government, said it was contesting the state government’s claim. “As per policy of the government of Maharashtra, Giga Solutions had opted for giving 5% cashless equity for obtaining ‘right of way’ for laying cables.
Subsequently, the government of Maharashtra has changed its stance and is asking for cash compensation instead of cashless equity, which the company is contesting,” a Giga Solutions spokesperson said on email. Cashless equity, typically used by governments in financial transactions, amounts to a holding granted to it free. The government is often represented by a board member and gets a proportionate share of dividend. Chief secretary to the government of Maharashtra Johny Joseph was not reachable for comment.
As disclosed by RCom, controlled by billionaire Anil Ambani, on Friday, it also faces a potential challenge to the MTN deal from Reliance Industries Ltd, controlled by Mukesh Ambani. Anil and Mukesh split their father’s businesses in June 2005 but have increasingly battled each other in small and big ways.
Reliance Industries has claimed a right of first refusal on RCom shares in a letter last Thursday to MTN, its main shareholders and advisers. RCom has called the claim “legally untenable”. A person close to the situation said Reliance Industries was awaiting RCom’s response. Reliance Industries spokesperson Paresh Chaudhry said he had no fresh comment to offer.
Meanwhile, talks with MTN are at a delicate stage with news agency Press Trust of India reporting that a team of six senior executives of the African firm had landed in Mumbai as part of what is called due diligence, a study of operations and finances of a company preparing for a merger.
An announcement on the proposed merger could come on or before Thursday, 19 June, the day when MTN board’s meet ahead of its annual general meeting at Johannesburg.
Anil Ambani will be named the chairman of the merged MTN-RCom entity and the single largest shareholder, an industry person with knowledge of the talks said, asking not to be identified.
Yuraisha Moodley, a spokeswoman for investor relations at MTN, confirmed Thursday’s board meeting but said she did not know the agenda.