According to the Financial Times, South Africa’s MTN is considering walking away from a tie-up with Reliance Communications (RCOM) because of fears an acrimonious spat between the Indian telecom operator’s owner and his brother could leave the deal open to legal action. A person familiar with the talks on Sunday said he expected MTN and Reliance to extend their exclusive talks for another two to three weeks after a 45-day period expires on Tuesday. However, there is no indication that extra time alone would be sufficient to resolve the feud between Anil Ambani, the billionaire industrialist who is Reliance’s controlling shareholder, and his brother Mukesh.
Reliance and MTN are aiming to create one of the world’s largest emerging markets telecoms operators with 115 million subscribers in Africa, the Middle East and India. Under the deal, MTN would acquire Reliance. But Anil Ambani would take control of MTN by swapping most of his 66% stake in the Indian mobile operator for shares in MTN. Together with investment from private equity and sovereign wealth funds, he would end up with a stake of between 50%-51% in the South African operator. This controlling shareholding in MTN would enable Anil Ambani to rebuff the claim from Reliance Industries, controlled by his elder brother Mukesh, that it has a right of first refusal over RCOM. There are mounting fears, however, that none of the myriad deal structures under discussion would sufficiently insulate the combined company from Mukesh’s lawyers, leading to the South African firm’s apparent change of heart.