The feuding Ambani brothers need to reach a settlement. The 45-day exclusivity period for talks between telecom operators Reliance Communications Ltd , or RCom, and South Africa’s MTN Group Ltd expires next Tuesday. Yet a legal spat between Anil Ambani, who controls RCom, and older brother Mukesh Ambani—who controls the other half of the Reliance empire that was acrimoniously divided after the death of their father—is obstructing the potential $80 billion tie-up.
MTN and RCom’s 45-day exclusivity period for talks expires on 8 July. Discussions between the South African and Indian telecom operators to create an emerging market giant are understood to have been stalled by a legal challenge on the Reliance side.
In the structure currently under discussion, RCom would become a subsidiary of MTN. Anil Ambani would be required to swap all or part of his 65% stake in RCom, becoming the single largest shareholder in MTN. Each company would retain their respective listings in India and South Africa.
Yet the younger Ambani’s right to sell his controlling shareholding to MTN is being challenged by his brother, who controls rival business empire Reliance Industries Ltd and is understood to claim he has a legal first right of refusal over such a transaction. Anil Ambani disagrees, arguing there is no sale, but rather an enlarging of his business.
Understandably, MTN wants the dispute resolved before committing to a deal. MTN’s lawyers are believed to support Anil Ambani’s legal perspective. Still, concerns remains that his brother could push the two head to head in a protracted legal battle through the courts. At this stage—with neither side showing signs of abating—it looks unlikely that a deal will be agreed to by the deadline.
MTN is understood to be willing to agree a 30-day extension, but only if the Ambani brothers can show signs of reaching a potential settlement.
The deal could be restructured into an Indian takeover of MTN. That, though, would be unpopular.
Talks about a similarly structured arrangement with India’s Bharti Airtel Ltd collapsed earlier this year. Also with MTN operating licences in 21 countries, a takeover by the Indian company is likely to trigger change of control clauses.
The Ambani feud has for over three years been prominently played out on the Indian corporate landscape, with all the twists and turns of a Bollywood movie.
This time MTN’s involvement, and the potential scale of the deal, is attracting international attention. The Ambanis risk hurting the Reliance brand under which they both operate, not to mention India’s already fragile image as a destination for foreign investment.