Mukesh Ambani-led Reliance Industries Ltd (RIL), in a sharply worded communication, has warned South African telecom major MTN against entering into any deal with Anil Ambani-led Reliance Communications Ltd (RComm). The letter advised the foreign telco that RIL had first right of refusal to any stake sold by RComm.
The RIL position is based on an agreement between the two brothers brokered at the time of the group?s split, which gave them both the first right to pick up shares if either offloaded a majority stake in any original group company. Copies of the letter have also been sent to the bankers managing the deal, as well as to RComm.
When contacted, an RIL spokesperson declined to comment. However, an RComm statement issued late Friday evening said, ?RIL?s claim is legally and factually untenable, baseless, and misconceived. RIL has based its claim on an agreement of January 12, 2006, which was unilaterally signed only by RIL?s officials, when RComm was under RIL?s control, under a procedure which the Hon?ble Bombay High Court, vide its judgement dated 15th October 2006, has held to be ?unfair and unjust?.?
The development is certain to throw a spanner in RComm?s negotiations with MTN. Under the proposed deal, Anil Ambani plans to swap his majority shareholding in RComm to become the single-largest shareholder in the merged entity. If the deal fructifies, it would make the combine the sixth-largest mobile operator in the world, with a total subscriber base of over 116 million (RComm?s 48 million plus MTN?s 68 million).
RIL?s move is also sure to lead to a fresh round of skirmishes between the two increasingly embattled Ambani brothers. RComm was originally floated as Reliance Infocomm by Mukesh Ambani. According to recent reports, Anil Ambani is negotiating to swap two-thirds of his 66% stake in RComm, the flagship company of the Anil Dhirubhai Ambani Group, for 35% stake in MTN. The reports say Anil is willing to offer an additional $4-5 billion in cash. However, MTN has only evinced interest in Ambani?s entire stake in RComm.
The latest development puts a question mark over the ability of RComm to pull off a deal with MTN. India?s largest mobile operator, Bharti Airtel, was earlier in talks with MTN for a possible buyout prior to RComm. However, those talks collapsed after MTN presented a completely different post-merger structure from the one proposed by Bharti.