The swift entry of Reliance Communications (RComm) into negotiations with MTN after the South African telecom company aborted talks with Bharti Airtel, has raised questions in industry circles over whether the two were already in covert discussions beforehand.
Industry sources said MTN has restricted its bargaining space after publicly declaring that it would like Bharti to become its subsidiary for South African operations. So, it is unlikely to agree to different terms with RComm, particularly when the latter is much smaller than Bharti in terms of revenues, market capitalisation and subscriber base.
In a statement, RComm would only confirm that ?negotiations between the two companies are taking place, but there is no certainty either on completion or on the timing of the said proposal?.
Given RComm?s aggressive plans, sources say it is unlikely that the country?s second-largest mobile operator would agree to becoming a subsidiary of MTN. RComm is investing heavily in GSM technology in India and is trying hard to catch up with Bharti Airtel, the largest domestic mobile operator.
Paul Booth, a South Africa-based telecom analyst, said, ?A tie-up between RComm and MTN would create a major global player, but the only way I see this happening is by MTN acquiring a share in RComm rather than the other way round. The question is whether RComm is ready to be acquired.?
For its part, by opening a separate channel of negotiations with MTN, the Anil Ambani-led RComm has succeeded in checking the possible growth of its closest rival in the domestic telecom space. Indeed, with the rollout of GSM services and prospect of picking up more subscribers with the advent of number portability, RComm is gearing up to nip at Bharti?s heels.
But if Bharti succeeded in clinching MTN, it would have been pitchforked beyond the striking distance of RComm. To date, Bharti has a subscriber base of 64 million, while RComm has 48 million. However, RComm?s GSM base is at a low of 7.01 million and has plenty of room for growth. RComm has a market cap of $28 billion, against $45 billion for Bharti and $38 billion for MTN.
