Reliance Communications (RCOM) and South Africa’s MTN on Friday announced that merger talks between the two telcos have ended. Anil Ambani-owned RCOM has become the second Indian telco in as many months to fail in pulling off a merger with MTN.
Bharti Airtel and MTN were close to a merger in May but the Indian telco called off the talks after the two companies failed to agree on the corporate structure of the combined entity.
“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,” Reliance Communications said in a statement.
MTN too issued a similar statement to Johannesburg Stock Exchange News Service late Friday evening, adding: “Accordingly, it has been mutually decided to allow the exclusivity agreement to lapse and caution is no longer required to be exercised by shareholders when dealing in MTN securities.”
The failure of RCOM and MTN to clinch a deal may present a second chance to Bharti Airtel to re-engage with the South African telco. As reported by ET earlier this week, MTN is learnt to have sent feelers to Bharti for reviving talks if it failed to clinch a deal with RCOM.
Sources close to the development said that Bharti was ‘open to take the discussions with MTN forward’. However, it is possible that other global telcos may also enter the fray for MTN.
A top industry source said the deal had hit a big roadblock as early as June 12, when Mukesh Ambani’s Reliance Industries wrote to MTN claiming that it has the right of first refusal over RCOM in the event of a change in management or change in the ownership of shares of the Indian telco.
Friday’s announcement means that RCOM and MTN have mutually agreed to call off talks three days prior to the end of the exclusivity period. Earlier this month, following the end of the 45-day exclusivity period, both telcos had agreed to extend the timeframe by another two weeks to July 21.
The formal end of talks comes a day after RIL had said it has started arbitration proceedings against RCOM to thwart a merger. RIL on Thursday had also said it would take legal action if the South African telco were to merge with RCOM.
The dispute between the two Ambani brothers relates to the RIL stance that it has the right of first refusal, a claim which has been repeatedly denied by the Reliance ADA Group.
The RCOM-MTN deal had assumed political overtones. The Samajwadi party, the UPA’s new partner at the Centre, has been pressing for the intervention of Prime Minister Manmohan Singh to play peacemaker between the feuding brothers.
Earlier this week, SP general secretary Amar Singh had slammed RIL’s attempts to ‘derail the deal’ while adding that the MTN deal was good for the country. In the event, no high-level political intervention seems to have taken place. On Friday evening, Mr Singh, when contacted by ET, declined to comment.
While no details of the RCOM’s negotiations with MTN have been officially disclosed, sources close to the negotiations have told ET that the deal structure which was envisaged involved RCOM becoming a subsidiary of MTN and RCOM’s promoter ADAG emerging as MTN’s largest shareholder.
This structure proved fatal for the deal, because Reliance Industries claimed it had a right of first refusal if RCOM was sold. While RCOM vehemently denied the existence of any such right, the legal uncertainties proved too much for MTN, leading to the deal’s collapse.
Source: Economic Times