Saturday July 19, 02:50 AM
RComm, MTN break off talks citing legal issues
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By Corporate Bureau
It certainly hasn't proved to be an Indian summer for MTN. In a joint statement issued simultaneously in Johannesburg and Mumbai on Friday, Anil Ambani-controlled Reliance Communications (RComm) and South African telecom giant MTN called off talks for the proposed mega deal by allowing their extended exclusivity agreement to lapse. The much-touted RComm-MTN deal was caught in a legal dispute with brother Mukesh Ambani's Reliance Industries Ltd (RIL) contending that it had first right of refusal over any stake sale in RComm. "Owing to certain legal and regulatory issues, the parties are presently unable to conclude a transaction. Accordingly, it has been mutually decided to allow the exclusivity agreement to lapse," read the terse statement released by both companies late on Friday evening. The announcement means MTN is free to pursue other suitors. MTN is also reported to have said that investors need no longer be cautious while dealing in its shares, now that the deal with RComm is off. The announcement came a day after RIL commenced arbitration proceedings against RComm by nominating Justice BP Jeevan Reddy, a former Judge of the Supreme Court of India, as an arbitrator for resolution of disputes. On July 8, RComm and MTN had extended the 45-day exclusivity period by another two weeks until July 21. It is learnt that MTN was wary of entering into a deal with a legal cloud over it and has reportedly sent feelers to other potential suitors. This is the second time in three months that MTN has failed to strike a deal with an Indian wireless operator. Bharti Airtel Ltd, India's biggest carrier, said on May 24 it ended talks with MTN after failing to overcome differences over ownership and management. RCom and MTN entered into an exclusive agreement for takeover talks on May 26. RIL opposed RComm's move on June 13, claiming first right of refusal under a 2006 non-compete agreement. However, this was countered by RComm, which says that the contentious agreement was signed in a one-sided deal when RComm was controlled by RIL chief Mukesh Ambani. Reliance Communications shares ended up 4.1% at Rs 435.20 in a firm market on Friday, adding to gains of 4.7% the previous day. But the shares are down 24% from late May when talks with MTN were first announced. MTN shares were down 1.11% at 132.51 rand in a weaker market by 10.42 GMT, as analysts in South Africa doubted a deal was on the cards.
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