Friday July 18, 11:06 PM
MTN, Reliance call off tie-up talks |
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By Gugulakhe Lourie and Rina Chandran
JOHANNESBURG/MUMBAI (Reuters) - South African mobile phone group MTN and India's Reliance Communications called off talks aimed at creating a top-10 global telecoms group, saying they could not reach a deal.
MTN, sub-Saharan Africa's biggest mobile phone group, and Reliance Communications, controlled by billionaire Anil Ambani, started exclusive talks on May 26 and the deadline had been extended to July 21.
"Owing to certain legal and regulatory issues, the parties are unable to conclude a transaction. Accordingly, it has been mutually decided to allow the exclusivity agreement to lapse," MTN said in a statement.
The extension, announced on July 10, came after a claim on shares in the Indian company by Mukesh Ambani, estranged brother of Reliance Communications chairman Anil Ambani, and a sharp drop in share prices created obstacles to completing a deal by the original deadline of July 8.
A deal would have created a $66 billion emerging markets telecoms giant with operations in about two dozen countries and around 120 million subscribers.
"I am sure they (MTN) will probably still be looking for diversification. There are other operators in India that they can look at, but they are much smaller in size relative to Bharti Airtel and Reliance Communications," said Rajay Ambekar, telecoms analyst at Cadiz African Harvest in Cape Town.
Ambekar said MTN would continue to keep an eye on the Indian market, adding that they would likely also look at opportunities in Pakistan, Bangladesh and maybe South America.
"I don't think they will completely walk away from the Indian market," Ambekar added.
One investment banker not directly involved in the deal said a move towards arbitration by Mukesh, who runs Reliance Industries, had raised the odds against a tie-up.
"For MTN, considering its size and its shareholding, it makes no sense at all to get involved in a company that is tangled up in legal complications," said the banker, who declined to be named.
The failure to reach a deal with Reliance follows a decision by India's leading mobile operator Bharti Airtel in late May to end talks with MTN. Bharti said it had called off the talks after MTN proposed a new structure that would have seen the Indian group becoming a unit of the South African-based group.
"(MTN) will look for other areas to access the Indian market," said Jan Meintjes, telecoms analyst at Gryphon Asset Management in Cape Town.
Reliance Communications shares ended up 4.1 percent at 435.20 rupees in a firm market on Friday, adding to gains of 4.7 percent the previous day. But the shares are down 24 percent from late May when the talks with MTN were first announced.
MTN shares closed 2.76 percent lower at 130.30 rand, as analysts in South Africa doubted a deal was on the cards.
Harit Shah, analyst at Angel Broking in Mumbai, said: "They (Reliance Communications) will continue to look at opportunities, and I am sure they are already looking at some. The stock might see an upmove on Monday as the uncertainty is over and it's beaten down so badly. There's not much downside."
Reliance Communications, which has been snapping up smaller overseas assets, recently bought a telecoms firm in Uganda and was one of four bidders last year for control of Telkom Kenya, which went to France Telecom. It has nearly 50 million subscribers in India, the world's fastest-growing mobile market and the largest after China.
MTN has about 68 million subscribers, and has pursued an aggressive acquisition spree in risky but lucrative African and Middle Eastern markets, and is eyeing other emerging markets.
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