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RCom-MTN deal about to break down?

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Anil_Ambani.jpgAre the merger talks between South African telco MTN and Anil Ambani’s Reliance Communications about to break down?
Although there is no official reply from either side, a Dow Jones news report from Singapore on Thursday quoted people familiar with the situation as saying MTN is concerned that a feud between the two brothers (Mukesh Ambani and Anil Ambani) “may jeopardise the ongoing merger talks” between RCom and MTN.

The source also said that MTN and RCom continue to be in talks, but the feud between the Ambani brothers may derail the deal.

RCom officials did not offer any reaction to the news report. So far, industry sources have been saying that a deal between RCom and MTN was expected in the first half of July.

When DNA Money independently checked with an industry source, he said the game is far from over and that the structure of the deal is being changed to RCom buying MTN, rather than the other way round. In case of such a change, Mukesh Ambani’s claim of having the first right of refusal would not come in the way, the source said.

Earlier this month, Mukesh Ambani’s Reliance Industries Ltd (RIL) had sent a letter to MTN saying that his company had the first right of refusal on any deal involving sale of RCom.

According to RIL sources, it can decide in four months whether it would buy the RCom shares if the telecom company is sold. MTN, it is believed, may not like to wait for four months in case the court ruled in RIL’s favour.

Before RCom engaged in a dialogue with MTN, India’s leading mobile phone operator Bharti was in advanced negotiations for a merger deal with the African telco. However, the talks between Bharti and MTN broke down over issues related to control of the merged entity.

It is learnt that so far the talks between the two were focused on Anil Ambani selling his 66% in Reliance Communications to MTN in a share swap. Although this would make RCom the biggest shareholder of the merged entity, it would become a subsidiary of MTN.

RCom and MTN’s 45-day exclusivity period (for the merger talks) would lapse on July 9. MTN has not commented on the possibility of extending talks beyond the stipulated period.


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