RComm shares rise 12.5% on MTN deal hopes

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Shares in India's Reliance Communications surged 12.5 per cent on Friday on expectations some clarity may soon emerge on its exclusive talks with South Africa's MTN Group that end next week.

The 45-day period of exclusivity ends on July 8, Reliance Communications has said, and some analysts and traders say the two firms may agree to extend talks or offer some other direction on a deal that could create a top-10 global telecom firm.

"There is an expectation that MTN may agree to an extension of talks," said a dealer who asked not to be named.

"But the question is for how long and under what conditions?"

An extension would give Reliance Communications chairman Anil Ambani some time to try to resolve a claim of right of first refusal on the telecom's shares by his estranged brother Mukesh, who runs Reliance Industries, India's largest firm.

Some traders and analysts expect Reliance Communications could make some sort of a statement on Sunday, July 6, the death anniversary of Dhirubhai Ambani, founder of the Reliance group.

"They are not likely to say a deal has been done," said Nishna Biyani, telecom analyst at Prabhudas Lilladher.

"They will probably say they are extending talks; that is if both firms are agreeable to a deal."

Shares in Reliance Communications, which had lost about a third of their value since it said on May 26 it was in talks with MTN, jumped as much as 15.5 per cent on Friday in a firm market.

The shares ended up 12.5 per cent at 438.20 rupees, their biggest one-day gain in just over two years, helping lift the benchmark index 2.75 per cent.

At Friday's close, Reliance Communications was valued at $21 billion, still sharply down from $28 billion when the talks were announced.

The lower valuation could spoil the share swap that Reliance Communications has been reported to be discussing with MTN.

Some analysts have said MTN was not likely to agree to an extension of talks unless Reliance Communications was able to offer some sort of a guarantee it could settle the dispute or that Reliance Industries had no legal claim.

Late on Thursday, Reliance Industries said it had invoked a dispute resolution agreement to settle the differences and invited Reliance Communications to participate. But this was immediately dismissed by the mobile firm.