Reliance Communications Starts Exclusive Discussions With Mtn

[@ksh@T 20]

NEW DELHI: Within a day of Bharti Airtel pulling out of negotiations to acquire an estimated 50 billion dollar MTN, Anil Ambani group company Reliance Communications is understood to have started discussions for a possible tie up with the South African telecom entity.

Reliance Communications officials both in (Delhi and Mumbai) could not be contacted for comments despite numerous attempts.

Bharti Airtel decided to pull out of the negotiations as MTN had proposed a structure which would have made Bharti Airtel a subsidiary of the South African company, contrary to the agreed terms between the two firms.

Meanwhile, the Wall Street Journal today reported that the Reliance Communications is in talks to combine with South African cell phone company MTN Group, after Bharti Airtel pulled out of negotiation with MTN.

Quoting people familiar with the matter the daily said "the discussions may go nowhere and precise details of the Reliance tie-up being discussed could not be learned, though one person said a deal may be structured as a purchase of Reliance by MTN."

The daily further added that a combination of MTN and Reliance Communications would create a global wireless juggernaut, larger even than developed-market giants such as AT&T Inc.

Even amidst Bharti and MTN being engaged in talks, rumours had surfaced about rival bids being launched by other entities, including China Mobile, Indian-origin Arun Sarin-led British telecom giant Vodafone, Egypt's Orascom, UAE's Etisalat, Germany's Deutsche Telekom and Russia's Vimpelcom.

However, all these rumours came to nothing with all the rumoured suitors mostly denying any such moves.

'Reliance Communications favourite in merger talks with MTN'

LONDON: India's Anil Ambani-led Reliance Communications is the favourite in global merger talks with the African mobile phone operator MTN, after Bharti Airtel of India withdrew from the race, media reported said on Sunday.

MTN and Bharti fell out over the structure of a combined group.

According to a report in The Sunday Times, Arun Sarin, the chief executive of Vodafone, will tell shareholders on Tuesday that he will not be drawn into bidding for MTN after the African mobile-hone operator abandoned plans to merge with Bharti Airtel.

The London daily quoted sources as saying that Bhartis domestic rival, Reliance Communications, is the favourite to land MTN.

Vodafone had considered a 20 billion pounds bid for the company, which has 68 million customers in 21 African and Middle Eastern markets, before publicly declaring two weeks ago that it would not proceed.

Instead, it is still keen to buy out its partner Telkom from their joint venture Vodacom in South Africa, a deal that crumbled late last year.

According to the report, Sarin is keeping a keen eye on China's telecoms market, which is restructuring to create stronger competitors to China Mobile, in which Vodafone has a 3.3 per cent stake.

China Mobile, which is recruiting seven million new subscribers every month, will absorb China Tietong Telecommunications, a fixed-line operator. The Chinese government plans to issue three 3G licences once the reorganisation is complete.

Edited May 31, 2008 by @ksh@T

[KumaarShah 143]

Will ADA sell out to MTN? I doubt it.

If he does, it will be very bad. I think Bharti has done the right thing in refusing to sell out to a MNC. Why should Indian cos sell out to a MNC? We are capable of buying out MNCs today.

Anyway, its too early discussing this issue until some more details of this deal are available.

[KumaarShah 143]

NEW DELHI: Anil Ambani group company Reliance Communications on Monday announced entering into an exclusive negotiations with South Africa's telecom giant MTN to discuss potential combination of their businesses.

The two companies have agreed for a 45-day exclusivity to work out the details for merging their businesses.

The development comes just two days after South African company deviated from agreed terms with India's largest telecom player Bharti Airtel, who pulled out of 3-week long negotiations.

Commenting on the development, Anil Ambani said "negotiations are on to achieve global platform for exponential growth."

The company has also informed the stock exchange about the development and said that further announcement would be made when appropriate.

If the negotiations are successful, the combination of MTN and Reliance Communications would create a global wireless juggernaut, larger even than developed-market giants such as AT&T.

Last week, Bharti Airtel had decided to pull out as MTN had proposed a structure which would have made the Indian telecom giant a subsidiary of South African company, contrary to the agreed terms between the two firms prior to entering the discussions.

The valuation of MTN has been put at about $50 billion. Bharti Airtel had also claimed to have arranged funds of over $60 billion from over a dozen of international reputed banks for the deal.

Although no official figures have been given by the company but sources have put MTN between $45-50 billion.

Asked about the possible structure of the deal between Reliance Communications and MTN, sources said it is too early to say but they indicated that it would be in the direction of merging the two entities.

Reliance Communications is the second largest private telecom company in India offering a variety of telecom services both on CDMA and GSM platforms. It is looking for growth avenues both in the domestic and overseas markets and the current negotiations with MTN are also in that direction.

Courtesy: The ET

[Arun 795]

Reliance Comm and MTN seen favoring share swap

Tuesday May 27, 2008 6:51 AM EDT

Reuters

South Africa's MTN Group and India's Reliance Communications may swap shares or take big stakes in a new company as regulatory hurdles and both firms' global ambitions seem to rule out a $66 billion emerging markets telecoms merger.

The companies said on Monday they were discussing a possible combination, just days after India's top mobile firm Bharti Airtel (BRTI.BO: Quote, Profile, Research) ended talks with MTN after failing to agree how to structure a deal.

Bharti has said MTN proposed a structure that would have made it an MTN subsidiary, an outcome that was unacceptable to the Indian firm, which has ambitions of becoming a global player.

Analysts said Reliance Communications' chairman, Anil Ambani, who owns two-thirds of India's No.2 mobile operator, would also not want to cede control, casting doubt on media reports that MTN, valued at around $38 billion, planned a reverse takeover of Reliance, which has a market value of about $28 billion.

"If the structure proposed by MTN was not agreeable to Bharti, it's very hard to see them getting Anil Ambani agreeing to it," said one telecom analyst, who asked not to be identified.

MTN has more than 68 million subscribers, while Reliance Communications has around 48 million.

Rishi Sahay, director of Indusview Advisors, said the two firms might transfer shares to a separate entity in which they would both hold significant stakes, or swap shares in a way to get around potential regulatory hurdles.

MTN could take a stake of below 15 percent in Reliance Communications, avoiding having to make an open offer for a further 20 percent, and Reliance could take a minority stake in MTN that avoids regulatory triggers.

"It will most likely be a simple share swap that doesn't run into regulatory hurdles or require big cash," Sahay said. "No sudden-death M&A type of deal."

The Economic Times, citing unidentified sources, said Ambani may swap his 66 percent stake in Reliance Communications for a one-third holding in MTN. Ambani would retain an indirect holding of nearly a fifth in Reliance Communications.

The Financial Times, citing people familiar with the matter, said such a deal would leave Ambani as the biggest single shareholder in an enlarged MTN.

A banking source said Reliance held informal talks with MTN last year, leading to it conducting due diligence on MTN, sub-Saharan Africa's leading mobile operator.

"The best outcome would be the formation of an offshore holding entity in a tax-neutral zone with (both) as units," said the banker, who advised Reliance last year and asked not to be named because of the sensitivity of the current talks.

The banker said last year's talks broke down after the two sides could not agree on a valuation.

"If talks don't progress as expected, the two could trade minority stakes in each other. Such a move sets the contours for further discussion and kisses a long-drawn bidding war goodbye," the banker said.

No Bidding War

Indusview's Sahay said Reliance Communications, which has a track record of buying up smaller, often distressed assets, would not want to risk a bidding war over MTN.

"It's in their DNA. They might do due diligence and negotiate but if they feel it's too expensive, they will just walk away," Sahay said, noting Reliance lost out to Vodafone (VOD.L: Quote, Profile, Research) last year in an $11 billion race for control of smaller local rival Hutchison Essar.

"Their strategy has been to go after distressed assets because they can buy them cheap, then sell stakes at a premium," said Nishna Biyani, telecoms analyst at Prabhudas Lilladher.

Biyani said Reliance would want to avoid any deal structure that would issue fresh equity or load on debt, noting the firm had aggressive capex plans -- including more than $1 billion to roll out GSM services across India -- and an IPO lined up for its Reliance Infratel tower unit.

"RComm is the smaller player in this case, so it can't ask for a majority shareholding in MTN," Sahay said. "But neither will it be willing to be just a subsidiary."

Reliance Communications shares rose 1.5 percent on Tuesday, while MTN was quoted off 4.5 percent at a 4-week low.

[@ksh@T 20]

Anil Ambani may get to transfer just 61% RCOM stake to MTN

MUMBAI: Anil Ambani can at best transfer a 61% equity stake in Reliance Communications (RCOM) to the South African telco MTN as part of the deal the companies are contemplating to create a combined entity.

This is required to comply with the 74% cap on foreign shareholding required by Indian regulations. This is because foreign shareholders already hold 13% in RCOM, as per a JPMorgan report.

The contours of the deal under negotiations suggest that Mr Ambani will get nearly one-third stake in MTN against his shareholding in RCOM. The deal, as ET has reported, may be structured in a fashion to make MTN the holding company of RCOM.

If the deal goes through, Mr Ambani will be the single-largest shareholder of MTN with a one-third stake. MTN will, then, need to come out with a mandatory open offer for minority shareholders of RCOM to comply with the takeover guidelines.

But there are problems with this. The report raises questions on whether MTN's mandatory open offer will be permitted by the Indian laws. If 61% is transferred, it will saturate the 74% foreign holding in RCOM and the resident Indians will not be able to take part in the open offer. However, the brokerage is not sure whether such a partial tender offer is allowed.

The obvious solution is for Mr Ambani to transfer less than his 66% holding. A person familiar with the deal said nothing has been frozen so far. “Both the parties are considering several options and this is one of them. There is no guarantee that Mr Ambani will have to transfer 60% stake to MTN. He may transfer 40% stake to MTN to comply with the Indian law. In that case, he may have to pay some money to MTN to compensate the value of 20% equity in RCOM which, at current market price, is pegged at $6 billion,” he said.

The JPMorgan report, dated May 27, also points out that MTN may have to issue new shares to give one-third ownership to Mr Ambani. If that happens, the existing MTN shareholders' equity will come down on an expanded capital base.

But their exact shareholding, post the deal, will depend on the share swap ratio. These calculations are based on the assumption that the share price is fixed at Rs 600 for RCOM and Rand 150 for MTN. In this scenario, Mr Ambani will get new shares of MTN, equivalent to a 33.3% stake, if he transfers his 61% stake in RCOM to MTN.

These new shares will enhance the equity capital of MTN and therefore, the equity of existing shareholders will come down proportionately. The research report anticipated that Newshelf 664 will hold 8.7% post such a deal, against its existing holding of 13.1%. Similarly, the Mikati family's stake will come down to 6.8% (from 10.2%), PIC to 6.4% (from 9.7%). The free float will come down to 44.8% from 67.1%.

[Honest 836]

RCom may begin MTN due diligence in two days

Press Trust Of India / New Delhi

May 29, 2008, 0:25 IST

Having entered into exclusive negotiations for merging its business with the MTN Group, Reliance Communications is likely to start due diligence of the South African telecom giant in the next two days.

According to sources close to the development, Anil Ambani's team is likely to get hold of MTN books in next 48 hours as a part of the due diligence process.

Any decision on the structure of the new entity in the post-merger scenario will be taken only after completion of the due diligence.

Asked by when the process would be completed, sources said there is exclusivity of 45 days by when the two companies have to decide on the potential merger.

On May 26, RCom announced entering into exclusive negotiations with MTN to discuss potential combination of their businesses.

RCom Chairman Anil Ambani had said talks were aimed at achieving "a partnership, which would provide investors, customers and the people of both companies a unique and global platform for exponential growth, creating substantial long-term shareholder value".

On May 24, Bharti Airtel ended its 21-day negotiations with MTN on the ground that the South African company proposed to make the Indian company a subsidiary.

[@ksh@T 20]

Reliance may pay premium for MTN control

JOHANNESBURG: India's Reliance Communications is prepared to pay a significant premium for control of South African mobile phone group MTN, a newspaper website said on Thursday.

The website said there were two options for the transaction: a straightforward cash and shares bid for MTN from Reliance, or a second plan under which MTN would retain its South African identity but Reliance Chairman Anil Ambani would own 34.9 percent of MTN.

MTN and Reliance said on Monday they were in exclusive talks after India's biggest mobile phone operator Bharti Airtel broke off talks with sub-Saharan Africa's biggest cellphone group.

A combination of MTN, valued at $35 billion at Wednesday's close, and Reliance, valued at $27 billion, would create a top ten global industry player to rival Japan's NTT DoCoMo Inc in market value.

In terms of subscribers, a merged group would slot in just below Deutsche Telekom as the seventh biggest in the world. FT Alphaville said, without citing its sources, that under the full control option, MTN Chief Executive Officer Phuthuma Nhleko would become CEO of the enlarged group for at least three years.

MTN Chairman Cyril Ramaphosa will become co-chairman alongside Ambani for 12 months. After this period, Ambani will then become chairman and Ramaphosa vice-chairman. Under the second option, MTN will buy 51 per cent of Reliance from Ambani and pay in stock.

The exchange ratio will include a premium deal price and MTN would then make a cash offer for 20 per cent of Reliance shares held publicly. MTN shares were 4.7 per cent stronger at 149.13 rand in Johannesburg by 1439 GMT while Reliance Communications shares closed 3.9 per cent higher at Rs 573.20 in India.

Ambani would then have enough shares in MTN from existing shareholders to lift his direct stake to 34.9 per cent. The website said although Ambani will have economic ownership of little more than 33 per cent of the enlarged company, he is insisting on effective control in return for a premium valuation of MTN.

It said Nhleko has been informed that he would be asked to head a combined MTN Reliance for at least five years. Existing stock market listings in New Delhi, Mumbai and Johannesburg would be retained and a secondary listing in London is planned.

[Arun 795]

Reliance is Rome and Apollo means Ambani!

Press Trust of India - May 29, 2008 19:47 IST

Rome is in India, Madrid in South Africa and Apollo, who currently rules Rome, is also seeking to gain control over Madrid!

This may appear a gross distortion of facts, but sums up the talks between investment bankers related to one of the biggest mergers and acquisitions deal in the history of corporate India: between Anil Ambani-led Reliance Communications [Get Quote] and South African telecom giant MTN.

As is common practice of key parties associated with high-profile M&A deals being referred to by code names, this time around, Reliance has reportedly become 'Rome', MTN is 'Madrid' and Ambani is 'Apollo'.

There are various permutations and combinations doing the rounds regarding what the final deal structure would be like.

While all that the companies have said is a start of 45-day-long exclusive talks early this week, various media reports have thrown out numerous deal structures quoting unnamed people close to the development and briefed on the matter.

One theory says that Rome would make a 100 per cent buyout offer for Madrid, while other says it would be Madrid taking controlling stake in Rome.

But all the structures point towards a combined entity being created that would figure among the biggest telecom giants in the world and probably the single largest among the emerging economies.

One report in FT Alphaville, the official blog of British daily Financial Times, on Thursday said that Reliance, code-named Rome will make a straightforward cash and shares offer for MTN, which is being referred to as Madrid.

"Discussions on the mix have centered on a ratio of 65 per cent in Reliance stock and 35 per cent cash," it says.

The blog further says that Phuthuma Nhleko, president and chief executive of MTN (whose code-name is not known yet), would become the chief executive of the combined entity for at least three years, with MTN chairman Cyril Ramaphosa becoming co-chairman of the new group, alongside Ambani, for one year.

Later, Apollo (code name for Ambani) would become the sole chairman and Ramaphosa would be vice chairman. The report says the combined entity could remain an Indian company with a secondary listing in Johannesburg, South Africa.

Another probable structure reported in FT blog points towards MTN retaining its South African identity. It entails MTN taking a 51 per cent stake in Rome from Apollo.

Whatever be the nitty-gritty, it has thrown out some interesting code names in the form of Rome, Madrid and Apollo.

In another high-profile M&A deal last year, it was Ruby taking over Diamond. These precious stone names were two key words in a billion-dollar deal to mark the merger of two of the world's biggest media giants: News Corp and Dow Jones.

Ruby was a codename for Rupert Murdoch, while Diamond stood for Dow Jones. Interestingly, these two words were mentioned even in the regulatory filings with SEC.

Similarly, in the Arcelor takeover by Lakshmi Mittal, investment bankers used motorcycle brands as the code names. Arcelor was 'Aprilia', 'Suzuki' was the rival suitor Severstal and Mittal became 'Moto Guzzi.'

In another mega-merger deal in steel sector -- that of Tata Steel's [Get Quote] acquisition of Corus, Tata Steel was given a code name of Truro, a South England town in Cornwall.

When bankers were searching for a prospective suitor for Corus, they called the potential sale as 'Project England.'

Later when Tata remained the only serious partner -- that was before Brazil's CSN coming on stage -- the talks were focused on a one-to-one basis and this time the deal was called as 'Project Colour.'

[city02 63]

actually 'anil hacked bharti's call' is misleading since it implies that he took something from airtel

whereas the reality is that sunil walked away from the mtn revised terms so anil just picked up the discard.

it should have been 'anil picks up sunil's dropped call' or something like that!

;-)

[Honest 836]

RCOM, MTN try to stitch complex deal

30 May, 2008, 0540 hrs IST,

TNN

MUMBAI: Reliance Communications (RCOM) may present its Indian minority shareholders the option of swapping their shares with MTN at the same rate as its promoters, the Anil Dhirubhai Ambani Group (ADAG). The minority shareholders, will of course, have the conventional option of encashing their holding in RCOM by participating in the open offer, which may be launched by the South African telco MTN.

This is one of the possibilities RCOM is weighing as it tries to strike a deal with MTN which, if successful, will create an entity with a combined market capitalisation of $66 billion with a presence in 23 countries. This is in line with RBI norms, which allow a spending of $50,000 by an individual in foreign markets a year. The Indian minority shareholders hold 23% in RCOM while foreign investors control 11% stake. ADAG holds 66% equity in the country’s second-largest private wireless telephone company.

Sources close to the development said a clearer picture of the deal has emerged in the past four days after the parties engaged in hectic parleys. MTN, sources said, would sign an agreement to buy up to 74% in RCOM, the maximum permissible limit for foreign equity holding in an Indian telecom company. The proposed transaction involves two steps. The first step would be a mandatory open offer for 20% for the minority shareholders.

In the next stage, depending on the response to the open offer, Mr Ambani will swap his shares in RCOM for MTN shares, enabling the latter to reach 74%. This can be better explained with an example. Consider two extreme cases — one where the entire lot of foreign investors of RCOM (11%) opts for the MTN open offer and two, when they stay away from it but the offer receives subscription from Indian minority shareholders.

In the first case, MTN’s holding in RCOM, post the open offer, will be 11% and therefore, Mr Ambani will need to swap 63% of his RCOM stake in MTN shares to enable the latter to reach the 74% FDI limit. The second scenario would help MTN end up with 20% stake, post the offer, while the existing foreign investors would continue to hold 11%. In this case, Mr Ambani would exchange his 43% stake in RCOM to get MTN shares. If there is no response to the open offer, Mr Ambani would also swap a 63% stake in RCOM to enable the latter reach 74%.

In other words, MTN would end up getting anything between 63% and 74% of RCOM equity, including the open offer, and Mr Ambani would give away anything between 43% and 63% stake in RCOM to get MTN shares. Depending on the share-swap ratio, Mr Ambani is expected to pick up a 28-34% stake in MTN. But he would be by far the single-largest shareholder in MTN. He would not cross the 35% mark as the Johannesburg rules demand an open offer beyond this figure.

Newshelf 664 is the largest shareholder of MTN with a 13.1% stake. The Beirut-based Mikati family holds 10.2% while PIC has a 9.7% stake. The rest 67.1% is widely held. Post deal, the holding of these shareholders will come down as the equity capital of MTN will expand on account of issuance of new shares to RCOM shareholders and ADAG.

Some people feel that the share-swap option may not elicit a good response from Indian minority shareholders. “It is difficult to expect many takers for the share-swap offer. And frankly speaking, there is no reason that a minority shareholder should be attracted to trade on the Johannesburg Stock Exchange where MTN is listed,” said a banker. Some others, however, believe that the option may lure some investors. “Minority shareholders have invested in RCOM because they believe in the company’s promoters. Now one does not know whether they would like to tag along with the promoters to Johannesburg as well,” said an analyst.

However, those who are not interested in the share swap would have the liberty to sell their shares in the MTN open offer. MTN will issue fresh shares to those who want to swap their holding in RCOM, including Mr Ambani. As reported in ET earlier, the broad contours of the deal thus indicate that Mr Ambani will emerge as the largest shareholder of MTN and RCOM will be its subsidiary.

While the RCOM side is being led by Mr Ambani himself, his trusted lieutenant Amitabh Jhunjhunwala and Lazard officials took part in the negotiation as well. Lazard is RCOM’s advisor while MTN is being advised by Merrill Lynch and Deutsche Bank. A formal due diligence is expected to begin within a couple of days.

Now, both parties are trying to reach an agreement on the management control of MTN and RCOM. The agreement so far is that the companies will retain their existing management where they are strong. For instance, MTN’s African operations will run the existing management as RCOM does not have any business experience there. By the same logic, MTN will not interfere in RCOM’s operations in India. The apex management committee is expected to be comprised of equal representatives of both parties.

The discussions are also focused on how ADAG will retain its majority control in MTN, in case of a future takeover threat by a third party. A source said MTN has a built-in cushion as local laws require at least 26% shareholding by black investors. Mr Ambani may scale up his holding by crossing the 35% mark, which will demand him to launch an open offer.

Share prices of MTN are quoted around rand 165. The RCOM stock on Thursday closed 3.9% higher at Rs 573.20 on BSE. It rose more than 6% after a Macquarie research report said the deal was positive and it expected a rebound in the stock. The stock went up as much as 6.5% to 587.70, taking it to its highest since last Friday, the last day of trading before the news about a possible tie-up with MTN emerged. The Macquarie report said a share swap between ADAG and MTN was “positive for RCOM due to the ramp-up in non-wireless businesses and we expect the sale of shares to MTN to be at a premium to RCOM’s current price.”

[Honest 836]

Sibling rivalry spurs Anil Ambani to merge his firm with MTN

30 May, 2008, 1936 hrs IST, IANS

NEW YORK: Anil Ambani's interest in merging his Reliance Communications with South African cellphone operator MTN Group is spurred by his fierce business rivalry with his older brother Mukesh, The Wall Street Journal wrote here on Friday.

The proposed merger will give Anil first bragging rights to a major international deal in the latest round of him and Mukesh vying to outdo each other since their father's death left them in control of one of India's biggest companies, the WSJ said.

For the deal Anil may have to swap all or part of his 66 percent stake in his company for a big stake in MTN, making him the largest shareholder in a telecommunications empire with more than 100 million subscribers in Asia, the Middle East and Africa.

He wants to work with MTN to expand into markets outside India. The combination would make both companies more efficient and give them the firepower to expand at the brisk rate Anil prefers, people familiar with his thinking say, reported the Journal.

The world's foremost business daily noted that the rivalry between the Ambani brothers has helped make each of them among the world's richest men -- and triggered the split of the company they inherited.

The MTN deal is, however, risky and may never happen, the paper said. But it is the latest bold step in Anil's career as a dealmaker. A creative negotiator, he told his executives that they need to find a way to join forces that would work for MTN, which has entered discussions with various companies including Sunil Mittal's Bharti, but never closed a deal.

"Let's try to understand what MTN is looking for and craft a solution that meets their objections. We need to find some different approach that will make them want to deal with us," Anil said, according to one executive as quoted by the Journal.

Reliance Communications - market value under $30 billion -- and MTN - valued at $40 billion -have agreed to 45 days of exclusive talks. If the deal happens, Anil would be the largest shareholder in the combined company and would continue to run the business in India.

Giving the background to Ambani brothers' rivalry, the Journal compared it to a family soap opera. After their father Dhirubhai Ambani's death in 2002 without a will, Mukesh Ambani, now 51, assumed control of most of the Reliance group companies' boards as well as the family's 40 percent plus holding in the flagship, Reliance Industries Ltd.

While Anil and Mukesh appeared to work well together earlier to build the family business, with Dhirubhai gone, their differing personalities and Mukesh's position as chief custodian of the family business soured their relationship.

Mukesh, the more sombre of the two, agreed to an arranged marriage, and has been the builder, spearheading the construction of Reliance's massive refining and telecommunications projects.

Anil, 48, has been the deal maker, a polished interlocutor with foreign investors. Married to a former film star, he appears in the society pages of Indian newspapers with his Bollywood friends, the Journal said.

In 2004, Anil took his battle with Mukesh public. He accused Reliance of everything from ignoring shareholders to financial irregularities. He and directors loyal to him offered to resign from the boards of some Reliance companies. Mukesh eventually relinquished control of close to 30 percent of the group, which Anil spun into his own group.

The two brothers to this day rarely talk, people close to them say, even though they share an 18-storey mansion in south Mumbai, the Journal said.

Reliance Communications became the flagship of Anil's interests, now assembled under Reliance Anil Dhirubhai Ambani (ADA) Group. The group includes finance company Reliance Capital and power company Reliance Infrastructure. Anil's majority stakes in most of these companies give him a net worth close to $40 billion.

In the last fiscal, the market capitalisation of the Reliance ADA Group of companies more than doubled, while shares in Mukesh's Reliance Industries and its related companies rose 79 percent. Anil's companies now have a market value of about two-thirds of those run by Mukesh, the Journal calculated.

[Honest 836]

RCom appoints Ken Costa as advisor for negotiations with MTN

3 Jun, 2008, 1809 hrs IST, PTI

LONDON: Reliance Communications, India's second-largest private mobile operator, has appointed city-based banker Ken Costa to advise the firm on negotiations with South Africa's MTN, a media report said on Tuesday.

Both MTN and billionaire Anil Ambani-led RCom entered exclusive talks for a possible merger last month.

"Ken Costa, the veteran London-based banker, has been appointed by Reliance Communications, the second largest Indian mobile company, to advise on its negotiations with MTN, Africa's largest wireless group," The Times said.

Costa is the chairman of Lazard's international business and co-head of UK investment banking. "The Reliance advisory role will be seen as a coup for the dealmaker, who rivals say was brought in to bolster Lazard's profile, which had recently slipped on big-ticket mandates," it added.

The Times said the options being discussed by Reliance and MTN involve an arrangement under which Anil Ambani would take 34 per cent of an enlarged MTN, a holding that would make him the largest single stakeholder but would not trigger an obligatory open offer for the remainder of the South African company.

"Combined, the companies would form the fourth-largest mobile group in the world, after China Mobile, Vodafone and China Unicom," it said.

According to the report, published on the newspaper's online edition, Costa's past deals include the relocation of Anglo American, the mining giant from Johannesburg to London, and the acquisition of the Ritz by the Barclay brothers, Sir David and Sir Frederick, in 1995.

"Earlier this year he advised Olivant, the investment vehicle owned by former UBS executive Luqman Arnold on its failed bid for Northern Rock," the report added.

[@ksh@T 20]

RComm, MTN to create a global top-10 telecom firm

MUMBAI: Reliance Communications Ltd and South Africa's MTN have begun due diligence as they inch closer to creating a global top-10 telecoms firm, a source close to the development said. The two firms began due diligence over the weekend aimed at a reverse takeover, the source said on Wednesday.

Media reports last week suggested the two were discussing a cash and stock swap deal where MTN would take a stake of up to 74 per cent in India's No. 2 mobile operator, and Reliance chairman Anil Ambani become the biggest shareholder in MTN.

The Financial Times on Wednesday said Ambani may link up with private equity groups for the deal, but the source said Reliance may not need assistance in funding as the discussions were aimed at a reverse takeover. Still, industry sources said if MTN were to insist on a large sum of cash as part of any deal, the private equity option could be tapped.

"It certainly is an interesting and plausible option if MTN were to ask for a large cash component," said a manager at a private equity firm that is not involved in discussions. Ambani could be open to selling a part of his 66 percent stake in Reliance Communications to private equity firms, he said.

"They have already done a deal with private equity firms before, and these firms may well have told Ambani that they are willing to be a part of this deal," he said. Reliance Communications last year raised Rs 1400 crore ($330 million) from a private placement of 5 percent of its tower unit company, Reliance Infratel, with seven investors: Fortress Capital, HSBC Principal Investments, Galleon Group, New Silk Route, GLG Partners, Quantum Fund and DA Capital.

"Liquidity is tight now, and markets are volatile, so private equity may be an easier option for Ambani now," the manager said. But the credit squeeze is also hurting private equity firms, and they may be averse to doing large deals now -- or push for lower valuations, said a manager at another private equity firm.

The Economic Times last week said a potential deal could see Ambani emerge as the largest single shareholder in MTN, with the Indian firm becoming a subsidiary of sub-Saharan Africa's biggest mobile phone operator. Based on foreigners holding 11 percent of Reliance Communication shares, Ambani could swap between 43 and 63 percent of his holding in the company for a stake of 28 to 34 percent in MTN, it had said. India allows up to a 74 percent foreign holding in telecoms firms by foreign companies, with a purchase of 15 percent triggering a mandatory open offer for 20 percent more.

Ambani's large holding in his flagship company and low foreign ownership makes a deal with MTN more plausible than the one that Bharti Airtel walked away from, Citigroup analysts said in a note this week. Analysts and media estimate foreigners own 10 to 13 percent of Reliance Communications.

Morgan Stanley has estimated an open offer for Reliance Communications shareholders could be at 613 rupees a share, a 7 percent premium to the stock's closing price on May 23, the last day they traded before the firms said they were in talks. Shares in Reliance Communications fell 2.3 percent on Wednesday to 540.15 rupees in a broader market down 2.8 percent.

They have lost 5.6 percent in the eight sessions since the talks were announced. Reliance is being advised by Lazard, while Merrill Lynch are advising MTN.

Edited June 4, 2008 by @ksh@T

[srk006 21]

Still it would be better if RCOM buys MTN instead of being a subsidary of MTN.

[Honest 836]

Anil Ambani meets Mikati in chase for MTN

5 Jun, 2008, 0251 hrs IST, TNN

MUMBAI: Anil Ambani, whose Reliance Communications (RCOM) is in talks with South Afrian telco MTN for a possible reverse merger, met Azmi Mikati, chief executive of M1, in London on Wednesday. The Mikati family's investment arm M1 is the second-largest shareholder in the foreign company, with a 10.2% stake. Newshelf 664 is the largest shareholder with nearly 3% more than the Mikatis.

This was Mr Ambani's first meeting with Mr Mikati after the two companies announced last week that they “were in talks” which, if successful, would create a telecom colossus with 115 million subscribers in 25 countries. They had once met at a global investors’ summit but had never discussed a deal, said sources close to the development. During the two-and-a-half hour long meeting, Mr Mikati is believed to have expressed his support to the reverse merger of RCOM with MTN.

Mr Ambani had, in the past one week, met Phuthuma Nhelko, CEO of MTN and a beneficiary of Newshelf 664. In fact, sources said, they have agreed to the broad contours of the deal which suggest that Mr Ambani will emerge as the single-largest shareholder of MTN with almost one-third stake while his RCOM will be a subsidiary of MTN. They have also discussed the management structure of the combined entity.

Now, with Mr Mikati favouring the deal, the finalisation of the complex transaction, which needs regulatory approval from several authorities in several countries, hinges on the pricing. Both the parties are learnt to have asked for ‘control premium’. RCOM wants a control premium as it will eventually become a subsidiary of MTN, while MTN’s demand is based on the argument that it will cede control to Mr Ambani.

Meanwhile, more advisors are joining the RCOM team. The latest addition is believed to be Lehman Brothers. RCOM’s advisory team is led by Ken Costa, chairman of Lazard in UK.

RCOM is sending a 12-member team to MTN headquarters in Johannesburg to examine its books. The team comprising three presidents — SP Shukla, Prakash Bajpai and Punit Garg, and officials of the legal, accounts and tower business — will leave Mumbai on Thursday. They are expected to finish the first round of due diligence by June 9. A similar team from

MTN is expected to visit Mumbai soon.

A foreign news agency said on Thursday that Mr Ambani may invite global private equity investors to join him in his bid to conclude a deal with MTN. Although there is no significant money transaction involved in the deal as he is expected to swap his RCOM shares to get MTN shares, he may be benefited from the vast experience of the PE investors if he takes them on board. If a deal as discussed by both the parties happens, MTN will launch a 20% open offer for RCOM shareholders. Mr Ambani may also provide an option to his minority shareholders of swapping their shares to get MTN shares.

[Honest 836]

Ambani may get up to 34% in MTN

9 Jun, 2008, 0230 hrs IST, TNN

MUMBAI: Anil Ambani’s Reliance Communication (RCOM) and the South African telco MTN are locked in negotiations to decide the share swap ratio at which Mr Ambani will transfer his stake in RCOM to MTN in return for a stake in the latter.

Although both the parties are learnt to have agreed on the broad contours of the deal, which will result in RCOM promoter ADAG emerging as the single-largest shareholder in MTN and the foreign company becoming the holding firm of the Indian telco, they are yet to decide the swap ratio.

It is learnt that Mr Ambani wants the ratio to be 0.66:1 (66 MTN shares for 100 RCOM shares) while the MTN management is asking for 0.51:1.

Sources said both the parties have started the due diligence exercise. A top team from RCOM, comprising a dozen officials, is now stationed at MTN’s headquarters in Johannesburg. They are expected to be back in Mumbai on Tuesday.

In addition to the share swap ratio, the parties are also discussing the structure of the management of the entity, post merger. It is learnt that they are in favour of keeping the existing management unchanged in most of the geographies.

However, it is certain that Mr Ambani will join the MTN board as either chairman or co-chairman. MTN chief executive Phuthuma Nhelko is expected to continue in his present capacity. Cyril Ramaphosa, a famous personality in the world of South African business and politics, is MTN’s chairman.

Depending on the share swap ratio and the response to the open offer, which MTN is expected to launch for RCOM shareholders, Mr Ambani may need to fork out some money as well. He is reportedly in talks with a number of private equity firms, including Carlyle, Blackstone and Apax Partners.

Deutsche Bank is the financial advisor to RCOM for this deal. Its other advisors are believed to be Lazard, Lehman Brothers and JP Morgan. Lazard’s head of UK operations, Ken Costa, is leading the RCOM pack. A clearer picture is expected this week. However, it is unlikely that the deal will be through this week.

Two weeks ago, MTN had signed an exclusive pact with RCOM, which means the foreign company will not initiate merger talks with any other suitors in next 45 days. MTN had entered into this pact after Bharti Airtel walked away from a similar arrangement describing it as a convoluted one.

The broad contours of the deal, as reported by ET, suggest that ADAG may hold a one-third stake in MTN against its 66% stake in RCOM. However, the exact shareholding of these two companies would depend on this share swap ratio and the response of the open offer.

MTN would end up getting anything between 63% and 74% of RCOM’s equity, including the stake garnered through the open offer, and Mr Ambani would give away anything between 43% and 63% stake. Depending on the ratio, Mr Ambani would end up getting anything between a 28% and 34% stake in MTN.

If he ends up at the lower end of the band, he may up his stake by directly investing money in MTN. Ultimately, he would hold close to 35% in MTN. Under South African norms, any acquisition beyond 35% requires an open offer which is not currently under consideration.

If the deal goes through, the combined entity will have a market capitalisation of $66 billion and operations in 23 countries.

[@ksh@T 20]

RCom, S Africa's MTN in 'advanced talks'

NEW DELHI: Reliance Communications and South Africa's MTN were in "advanced stages" of talks to create a global telecoms powerhouse and were nearing a deal, a source close to discussions said on Monday.

But the shareholding structure under which a tie-up between the two companies -- whose operations focus on fast-growing emerging markets -- would be concluded still must be finalised, the industry source said

"The talks are at the most advanced stages. The share swap, which is the final issue (to be settled)... is the last link," said the source, who has knowledge of the talks.

"You can say they are close (to an agreement)," the source said. "Everyone is hopeful."

Reliance Communications (RCom), India's second largest cellular operator by number of subscribers, entered tie-up talks with MTN late last month after rival Bharti Airtel, India's largest mobile firm, hung up on negotiations with Africa's biggest wireless operator in a dispute over control.

MTN Group and Reliance Communications announced late last month they had entered exclusive talks to discuss a "potential combination of their businesses" to "achieve a unique and global platform for exponential growth."

Reliance was expected to complete due diligence on MTN's accounts this week, likely by Tuesday, the source said.

A tie-up would create a global top-10 telecoms giant stretching from Asia to the Middle East and Africa with a 116 million subscriber base.

However, the two sides have yet to decide the exact share-swap ratio under which the deal would be achieved, the source said.

When contacted, an RCom spokesperson said the company could not comment on the discussions.

There was no immediate comment available from MTN, dubbed the "runaway bride" by the media after its talks collapsed with Bharti -- the latest in a series of discussions the South African firm had held with outside investors.

A national daily said on Monday the two sides were discussing a so-called "reverse merger" under which RCom would become a subsidiary of MTN and its chairman Anil Ambani would initially hold 28 to 30 per cent of the merged entity.

Ambani, who holds 66 per cent of RCom, might then buy another four to six percent through the market or from shareholders to reach a 34 percent shareholding in MTN through an all-cash deal, the paper said, citing unidentified sources close to the talks.

That would make Ambani the largest shareholder in the merged entity. MTN's various backers would hold the remaining 66 percent stake.

The deal would also require MTN to make an open offer to RCom shareholders to make it a subsidiary.

Other formulas were also being discussed, Indian newspapers said. Ambani was likely to be nominated chairman of the post-merger entity and MTN chief executive officer Phuthuma Nhelko was expected to keep his role, according to media reports.

"The parties are learnt to have agreed on the broad contours of the deal," said another leading Indian daily, The Economic Times.

RCom, which has 48 million subscribers, is valued at 28 billion dollars. MTN, which has 68 million subscribers in 21 markets in Africa and the Middle East, is valued at 38 billion.

Analysts expect any deal to offer a premium of over 20 percent that would value MTN at more than 45 billion dollars.

The two firms could leverage their skills in generating profits from low-spending customers in emerging markets that are the hot areas for mobile growth, with cellphone service in the West at saturation levels, analysts say.

[KumaarShah 143]

RCom-MTN proposed combined entity may look at London listing

10 Jun, 2008, 1708 hrs IST, PTI

NEW DELHI: Anil Ambani's Reliance Communications may opt for a secondary listing in London of the new entity after the planned takeover of the South African telecom firm MTN to increase liquidity of shares in the global market.

At present, Reliance is in exclusive talks with MTN with respect to a potential combination of their businesses. The exclusivity talks period of 45 days started on May 26. The due diligence is currently in the final stages and is likely to be concluded anytime.

Industry sources said MTN top brass including Azmi Mikati, the chief executive of the investment unit that is MTN's second-largest shareholder and Phuthuma Nhelko, the chief executive of MTN are positively inclined to have LSE listing of the merged entity.

However, the combined entity would continue to be listed in Johannesburg through MTN and in Mumbai through Reliance.

Sources said currently both the companies are working out the swap ratio and it is understood that Ambani wants to exchange his 66 per cent stake in Reliance Communications under a mechanism yet to be agreed for a 34.9 per cent stake in MTN.

The broad contours of the final agreement between them regarding share swap, modalities are likely to be finalised in the next 10 days, said industry sources. MTN's talks with RCom started after Bharti Airtel pulled out of negotiations with MTN.

Although the value of that MTN stake has yet to be agreed, it could constitute one of the biggest investments by an Indian company overseas, alongside Tata Steel's about USD 12 billion takeover of Corus last year.

[Honest 836]

Ambani looks to remain major shareholder in RCom, MTN

12 Jun, 2008, 1545 hrs IST, PTI

LONDON: Indian billionaire Anil Ambani hopes to remain a major shareholder in his flagship firm Reliance Communications and South Africa-based MTN after the two companies merge, a media report said on Thursday.

The Financial Times reported that Ambani hopes to be a major shareholder in RCom and MTN after the firms combine in a reverse takeover.

Quoting people familiar with the deal, the newspaper said, "Under the proposals, Mr Ambani will swap about two-thirds of his 66 per cent stake in Reliance Communications for shares in MTN and retain a stake of 20-25 per cent in the Indian cellular carrier."

Ambani would pay an extra four to five billion dollars in cash to bring his stake in MTN to his target level of 34.9 per cent, the ceiling beyond which he would be forced to make a general offer for MTN, the newspaper said in an article published in its online edition.

According to Financial Times, the cash amount would be raised through debt or by enlisting the help of private equity investors or a combination of both, although the private equity portion would not be expected to exceed two to three billion dollars.

He continues to remain extremely bullish about Reliance Communications prospects and would like to remain present there while getting a bigger piece of the action in MTN," the report said quoting an insider.

Last month, both companies had entered into "exclusivity talks" for a period of 45 days to explore the possibility of a merger.

"Both parties are expected to complete due diligence within a week, with an announcement on any deal expected early next month," the newspaper said.

The deal between RCom and MTN would create one of the largest mobile operator in the emerging markets with about 115 million subscribers spread across India, Africa and the Middle East.

Under the reverse takeover proposal, RCom, would be taken over and become a subsidiary of MTN, but through the share swap Ambani would become by far the biggest shareholder in the South African company, the report added.

Financial Times pointed out that Ambani is reluctant to surrender all of his exposure to RCom and is seeking to keep the 20-25 per cent stake to ensure that he would remain the biggest individual shareholder in the company after MTN.

"If Mr Ambani's proposal to hold large stakes in both companies is accepted by MTN, the South African operator would end up with a stake of about 51 per cent in Reliance," the report said.

The newspaper further added that Ambani has appointed HSBC and Barclays to lead the debt financing for his proposal to use cash to top up his stake in MTN beyond that achieved by the share swap to his target of 34.9 per cent.

"The move comes amid speculation that Mr Ambani is angling to retain a senior position in Reliance Communications, where he is currently chairman, while also becoming the chairman or co-chairman of MTN," the newspaper added.

Ambani is also being advised by Deutsche Bank on raising private equity financing for his bid. Further, Lehman Brothers and Lazard are also advising Ambani.

MTN is being advised by Merrill Lynch and Deutsche Bank.

[Honest 836]

RCOM hits debt trail to fund MTN deal

13 Jun, 2008, 0046 hrs IST

MUMBAI: Reliance Communications’ (RCOM) advisory team is expanding as its negotiations with the MTN take a definitive shape. Barclays and HSBC are believed to have been appointed to help RCOM raise debt finance for the transaction. The induction takes the number of RCOM’s advisors to five.

The broad structure of the reverse merger envisages that RCOM’s promoters, ADAG, would swap their shares in the country’s second-largest telecom company to get nearly one-third stake in MTN. On completion of the complex deal, RCOM chairman Anil Ambani would emerge as the single-largest shareholder in the South African telco and RCOM would become a subsidiary of MTN.

Mr Ambani, it is learnt, is keen to scale up his holding in MTN to 35%, the maximum permissible limit in South Africa without launching an open offer. Indications are that ADAG may need to infuse money, in addition to swapping their equity in RCOM, to get nearly one-third stake in MTN.

The funds required to consummate the deal, which would create a huge wireless company with 115 million subscribers in 23 countries in Asia, the Middle East and South Africa, is targeted through two routes. One, ADAG is expected to raise $2-3 billion from private equity investors. It has given the mandate to Deutsche Bank. Two, ADAG would tap the debt market in case it needs further money for which Barclays and HSBC are appointed.

In all likelihood, ADAG would float a special purpose vehicle for the transaction in a tax-neutral country. The PE investors are expected to pick up stake in that company against their funds infusion. Then, the company would raise debt, mortgaging its holding in MTN.

Sources said both the parties have agreed to the broad structure of the deal and are now working on a share-swap ratio. ET had already reported that while Mr Ambani wants a share swap ratio of 0.66:1 (66 MTN shares against 100 RCOM shares), the MTN management wants it to be 0.51:1. Mr Ambani's requirement of funds depends on the share-swap ratio. “But its almost certain that he needs to cough up some more funds to hold nearly 35% stake in MTN,” said a source close to the development.

Sources said the deal is expected to be sealed by early July. RCOM’s advisors — Lehman Brothers and Lazard — are also trying to resolve the issue related to the management structure of MTN, post the deal. Although the existing management teams of both the companies are expected to remain unchanged in most geography, Mr Ambani is likely to be the chairman of MTN. MTN’s CEO Phuthuma Nhelko is expected to retain his job.

The RCOM pack is led by veteran investment banker Ken Costa, head of Lazard's UK operations. Mr Costa is a legend of sorts in his own field.

Meanwhile, MTN shares on Thursday increased the most in 2-week trading on the Johannesburg Stock Exchange.

It rose 3.4% to 136 rand, the biggest increase since May 29. The stock traded at 134.80 rand in the morning trading session, valuing MTN $31.5 billion. The RCOM stock closed marginally lower at Rs 540, valuing the company at nearly $28 billion.

[Honest 836]

Reliance Comm says MTN talks progressing well

13 Jun, 2008, 2043 hrs IST

NEW DELHI: India's Reliance Communications said on Friday said talks with South Africa's MTN Group to create a top-10 global telecoms firm with operations in about two dozen countries were progressing well.

However, it said Reliance Industries, controlled by Mukesh Ambani, the estranged brother of Reliance Communications Chairman Anil Ambani, had made a claim of right of first refusal to buy the controlling stake in Reliance Communications.

"Reliance Industries' claim is legally and factually untenable, baseless, and misconceived," Reliance Communications said in a statement. A Reliance Communications spokesman said the discussions with MTN were going well and said the claim would not delay them.

Reliance Communications, valued at about $26 billion, is the second-largest mobile phone operator in India, the largest market in the world after China. Reliance had about 49 million subscribers at the end of May. MTN, which has a market capitalisation of about $31 billion, is sub-Saharan Africa's leading mobile operator.

At the end of March, it had 68 million subscribers in 21 countries in Africa and the Middle East. Reliance and MTN began talks last month after Reliance's larger Indian rival, Bharti Airtel, and MTN failed to agree over the structure of a proposed tie-up.

[srk006 21]

.............

However, it said Reliance Industries, controlled by Mukesh Ambani, the estranged brother of Reliance Communications Chairman Anil Ambani, had made a claim of right of first refusal to buy the controlling stake in Reliance Communications.

"Reliance Industries' claim is legally and factually untenable, baseless, and misconceived," Reliance Communications said in a statement. A Reliance Communications spokesman said the discussions with MTN were going well and said the claim would not delay them.

What does that mean? Any idea?

[Arun 795]

What does that mean? Any idea?

Mukesh calls MTN to disconnect Anil ; Anil Ambani's group charges Mukesh of sabotaging MTN deal

13 Jun, 2008, 2205 hrs IST - Press Trust of India

The war between Ambani brothers erupted again on Friday night with younger Anil's group charging Mukesh-led Reliance Industries with attempting to "sabotage" its potential multi-billion dollar deal with South African telecom giant MTN.

Mukesh Ambani group, however, declined to comment on allegations from the Anil's group that RIL had communicated to MTN about its claim to right of first refusal to buy controlling stake in RCOM and it was "legally and factually untenable, baseless and misconceived."

An RIL spokesperson said "no comments" when asked about the issues raised by Anil Ambani group.

Asserting that the new combined entity would have operating profits of Rs 50,000 crore, much higher than the Mukesh Ambani's group, RCOM official alleged that "RIL is seeking to disrupt the creation of one of the world's most valuable telecoms combinations."

Claiming that RIL's communication to MTN was based on a 'unilateral' agreement of January 12, 2006 signed by RIL officials, ADAG said that the agreement for effecting the family settlement was held "unfair and unjust" by the Bombay High Court later that year.

RCOM officials, however, exuded confidence that RIL's attempt would not delay the negotiations on the deal, that is believed to be in the region of over 70 billion dollars where Anil Ambani could be Chairman of the combined entity with single largest shareholding.

He, however, did not take questions on present status of the negotiations for which RCOM had entered into exclusive negotiations with MTN group on May 26 for a period of 45 days.

ADAG group said that "last night, in a mala fide effort to disrupt the talks (with MTN), RIL, part of Mukesh Ambani group, has sent a communication to MTN Group, making a false claim of an alleged right of first refusal to buy the controlling stake in Reliance Communications Ltd."

Terming it as legally and factually baseless, the spokesperson said that "RIL's claim is borne out of mounting despair and frustration at Reliance ADA Group's continuing successes, and the support it enjoys from over 10 million investors, the world's largest shareholding family."

"Reliance Communications dismisses RIL's claim with the contempt it deserves," the official said.

According to him, the new entity from the deal between R-Com and MTN would have have 120 million subscribers.

The official said that RIL has based its claim on an agreement of January 12, 2006, which was "unilaterally" signed by RIL's officials when RCom was under the RIL control.

However, this "procedure" was held to be "unfair and unjust" by the Bombay High Court on October 15, 2006, the ADAG spokesman said.

RCom got into the negotiations with South African giant MTN for a potential deal on May 26, aimed at creating one of the world's 10 largest telecom companies, with a potential size of about 70 billion dollars.

The release also said RIL's claim is "borne out of mounting despair and frustration" at ADAG Group's continuing successes, and the support it enjoys from over 10 million investors, the world's largest shareholding family."

RIL is seeking to disrupt the creation of one of the world's most valuable telecoms combinations, the release said.

RCom sources said that the letter was sent last night to MTN, but a copy of it came to them only after a gap of 24 hours. "If they actually had an issue they should have first sent us a letter, or raised their objections when we announced that talks were on. But their intention was to disrupt the ongoing talks," they said.

Asked what action RCom is planning to take on the issue, a source said: "It's just a letter and we will put it in a shredder. They can go to court and we will see."

In some relief to Anil Ambani, the MTN Group said late in the evening it is still in talks with RCom. MTN spokeswoman Nozipho January-Bardill told Reuters: "As far as we are concerned, nothing has changed. We are continuing talks as per our cautionary announcement published last month."

RCom had informed the stock exchanges on May 26, 2008, that it has entered into exclusive negotiations with the MTN Group for a period of 45 days, for a potential combination of their businesses after talks between Bharti and MTN Group failed.

The discussions are believed to be in the final stages and a deal is expected by next week.

The brothers are locked in another legal dispute as well over the gas pricing for power projects between RIL and RNRL. Corporate lawyers said both the Ambani brothers have a strong case on the first right of refusal clause and the matter would most likely end up in the courts.

In any family settlement, the first right of refusal clause is a standard clause so that if a family faction cannot run the business well, then the other should get the opportunity to run it. "If the clause is there in the Ambani brothers' agreement, then Mukesh has a strong case," said Som Mandal, a Delhi-based corporate lawyer.

"However, Anil can always claim that to grow his business, he has to go for this (MTN) arrangement. It looks like this matter is headed to the courts," he said from London.

RIL hits back, says ADAG never questioned agreement`s validity

New Delhi, June 13 - Zee News

Under attack from Anil Ambani's camp, elder brother Mukesh Ambani-led Reliance Industries on Friday night hit back, saying the "validity" of its agreement on Reliance Communication was never questioned.

"RIL in good faith notified both Anil D Ambani group and MTN (South African telecom giant) group of the stipulations contained in an agreement, the validity of which has never been questioned so far by ADAG," an RIL spokesperson said in a late night statement.

The statement thus questions the claims by ADAG that the Bombay High Court had held the RIL's claim of agreement of January 12, 2006 to be "unfair and unjust."

RIL's claim, based on the agreement, that it had the right of first refusal to buy the controlling stake in reliance communication, which is negotiating an estimated 70 billion dollar with MTN for creating a combined entity, was the latest trigger for the eruption of a war between the Ambani siblings.

[Honest 836]

Mukesh claims first right of refusal in RCom deal

14 Jun, 2008, 0238 hrs IST

MUMBAI: It’s Ambani vs. Ambani once again and, this time, the fallout could be global. Mukesh Ambani’s Reliance Industries (RIL) has suddenly entered the fray at a time when younger brother Anil Ambani’s negotiations with Johannesburg-based MTN was entering a decisive phase. The senior Ambani’s claim is that his flagship RIL enjoys the first right of refusal in case of sale of RCom, which is part of the Anil Dhirubhai Ambani Group (ADAG).

RCom and MTN are pursuing discussions to strike a complex deal which, if consummated, will result in Anil Ambani emerging as the single largest shareholder of the foreign company while his RCom will become a subsidiary of MTN. Both the companies had signed a 45-day exclusive discussion agreement on May 26.

It is learnt that Reliance Industries has sent a letter to MTN on Thursday (the same letter was sent to RCom on Friday), citing a non-compete agreement which, according to RIL’s interpretation, empowers it with the first right of refusal in case ‘any group decides to sell any of its business’. “RIL has in good faith notified MTN and RCom of the contents of an agreement, the validity of which has not been disputed by ADAG,” an RIL spokesperson said late on Friday evening.

Reliance Industries had signed the agreement on January 12, 2006, with some Anil Ambani group entities namely REVL, RNRL, RCVL and RCOVL. All these entities were created to implement the de-merger of businesses between the brothers in line with the June 2005 family settlement. Anil Ambani has subsequently challenged the legal validity of parts of the non-compete agreement on the plea that it was signed when all the companies, which had signed these agreements, were under Mukesh Ambani’s control.

RCom, reacted vehemently to the RIL claim, describing it as “legally and factually untenable, baseless and misconceived.”

In a press statement, RCom said: “RIL’s claim is born out of mounting despair and frustration at the Anil Ambani Group’s continuing success and the support it enjoys from 10 million investors. RIL is seeking to disrupt the creation of one of the world’s most valuable telecom combinations, which will make over a billion Indians proud. RIL’s actions are clearly anti-consumer, anti-investor and anti-globalisation, and against the vision, beliefs and principles of the founder of the group, late Dhirubhai Ambani.”

RCom officials said that the ‘malafide’ nature of RIL’s move could be gauged from the fact that the letter was first sent to MTN and then to RCom. “It is only intended to disrupt the negotiations. But the negotiations are on track. MTN operates in 21 countries. They were not born yesterday,” an official said. Late on Friday evening a Reuters report quoted an MTN official as saying that negotiations were on. “As far as we are concerned nothing has changed. We are continuing talks as per our cautionary announcement published last month,” MTN spokeswomen Nozipho January-Bardill told Reuters.

RIL for its part contends that Anil Ambani is planning to sell RCom — which Mukesh Ambani had built from scratch before handing it over to his brother as part of the family settlement — to MTN under the veil of a reverse merger. So, it should be given the first right to buy RCom. Also, since most of RCom shareholders are originally RIL shareholders, it was RIL’s duty to ‘protect’ them from a sale which would only help Anil Ambani. “If the price is attractive, RCom should return to the RIL family. It’s our fiduciary duty to RIL shareholders to explore all possibilities,” says an industry official close to RIL’s promoters.

RIL and ADAG have been locked in litigation over a host of projects. The most serious of these is a prolonged stand-off over ADAG’s rights over the price and quantity of natural gas discovered by RIL from the KG basin. As a result of ongoing legal proceedings in the Mumbai High Court, there is uncertainty over when RIL can begin supplying natural gas from the KG basin, from what is India’s discovery of gas. The two groups have also been locked in litigation over the Mumbai trans-harbour link.

A convention centre being built by RIL in Mumbai’s Bandra-Kurla complex and plans to built power plants in the Navi Mumbai SEZ (promoted by RIL chairman Mukesh Ambani) has also been embroiled in disputes and litigation. Industry observers describe RIL’s sudden intervention in the MTN deal as at least partly prompted by a desire to retaliate against the ADA Group.

In recent times, government circles, particularly in Maharashtra, are learnt to have expressed frustration that disputes between the two brothers was hurting attempts to improve Mumbai’s infrastructure. Corporates are also not amused by the RIL move. “Both the brothers have developed a habit of putting the spanner in each other’s expansion plans ever since they have parted ways. There are instances of one taking legal recourse in case the other gets a new project. It is only expected that RIL would try its best to spoil RCom’s efforts to figure among the world’s top telecom companies,” said an observer.

The Ambani brothers separated their businesses after one of the bitterest disputes in the history of corporate India. Anil Ambani got the control of telecom, power, entertainment businesses while Mukesh retained the money spinning oil & gas business.

If RCom’s reverse merger with MTN goes through, it will create a telecom colossus with 115 million subscribers in 23 countries in Asia, South Africa and Middle East. Anil Ambani is expected to hold nearly one-third equity in MTN and he is likely to be the chairman of the company.

[Honest 836]

MTN says talks to go on with Reliance Communications

14 Jun, 2008, 1453 hrs IST

JOHANNESBURG: South African telecom giant MTN on Saturday said its tie-up talks with Reliance Communications were still on, barely hours after the Anil Ambani-led group charged a rival corporate house with trying to derail the negotiations.

"As far as we are concerned, we have a 45-day exclusive talks agreement with Reliance Communications and nothing has really changed from our statement on May 26," MTN spokesperson Nozipho January-Bardill told the media.

The comments came in the wake of a letter to MTN from Reliance Industries, led by Mukesh Ambani, the estranged elder brother of Anil Ambani, saying that under a family pact between them, his group had the first right of refusal to buy controlling stake in Reliance Communications.

But Reliance Communications has refuted the claim.

"Last night, in a mala fide effort to disrupt the talks, Reliance Industries, part of the Mukesh Ambani group, has sent a communication to MTN group, making a false claim of an alleged right of first refusal to buy the controlling stake in Reliance Communications," an RDAG statement said late on Friday.

"RIL's claim is legally and factually untenable, baseless, and misconceived," said the RDAG statement. "Reliance Communications dismisses RIL's claim with the contempt it deserves."

Soon after Reliance Communications issued the statement, a spokesperson for the Mukesh Ambani-led group said its letter to MTN was issued in good faith and was merely stating the contents of the agreement reached in January 2006.

"RIL has in good faith notified both Anil Dhirubhai Ambani Group and MTN group of the stipulations contained in an agreement, the validity of which has never been questioned so far by ADAG," a Reliance Industries spokesman said.

But the statement by the Anil Ambani group said Reliance Industries based its claim on the Jan 12, 2006 agreement that was unilaterally signed only by RIL officials and found to be "unfair and unjust" by the Bombay High Court Oct 26.

Reliance Communications and MTN had said May 26 that they were in talks for a "possible combination of their business" just days after Bharti Airtel, India's largest private telecom company, ended merger talks with the South African firm.

The group said the two entities had also agreed upon a 45-day exclusivity period to work out the modalities, during which neither party would negotiate with any other entity.

"There is no certainty either on completion or the timing of the said proposal," the two groups had said in a statement. "Shareholders are advised to exercise caution in their dealings until a further announcement is made."

Reliance has been attracted by MTN's 70 million customers in 21 countries, including South Africa, Nigeria, Iran and Cyprus and its impressive balance sheet, which shows a net profit of $1.58 billion on revenues of $9.62 billion.

And for the South African company, a consolidation will result in access to 48 million customers of Reliance Communications, covering 15,000 towns and 400,000 villages in India on a network of 165,000 km of optic fibre cables.