RCom shares up, MTN deal hopes alive

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Shares in Reliance Communications rose nearly 3 per cent on Friday, as investors shrugged off the latest twist in a family squabble and kept alive hopes for a deal with South Africa's MTN Group to create a top-10 global telecom firm.

The Indian No. 2 mobile carrier controlled by Anil Ambani, has been in exclusive discussions with MTN since late May, but a claim by estranged elder brother Mukesh of first right on Reliance Communication shares has cast a shadow on the deal.

On Thursday, the feud between the billionaire brothers had escalated with Mukesh, who runs Reliance Industries, starting arbitration proceedings on the share claim -- a move that could complicate Anil's talks with MTN.

"The arbitration was expected, and has probably been factored in already," said Sandeep Shenoy, a strategist at brokerage PINC.

Shares in Reliance Communications were up 2.9 per cent at 430 at 0806 GMT in a firm market on Friday, the penultimate day of trade before exclusive talks with MTN end on July 21, and adding to gains of 4.7 per cent in the previous day.

"Serious interest is there ... I see a strong possibility of something happening," said Romal Shetty, head of the telecoms practice at consultancy KPMG.

"They have gone too far into each others' books ... it will be tiring for both of them to back track."

Still, the stocks are down about 26 per cent from late May.

"A little bit of bad news or good news is not going to have a big impact as the shares have already corrected from near-600 rupees to just above 400 rupees," said Nishna Biyani, telecom analyst at Prabhudas Lilladher.

Reliance Industries' nomination of an arbitrator had little significance, as Reliance Communications had to approve of it for the proceedings to commence, Biyani said.

A spokesman for Reliance Communications, which had called the move "legally and factually unwarranted", said he had no comment.

The enmity between the brothers, two of the richest men in the world, took another twist earlier this month when a new government ally with close links to Anil Ambani called for a windfall tax on private oil refiners.