MTN mum on Ambani legal battle

MTN will not comment on media reports that the deal with India-based Reliance may be Communication in jeopardy. “MTN Group Limited and Reliance Communications Limited have agreed to extend the period of exclusive talks until 21 July. At this stage, no further comment can be issued on the discussions. MTN cannot comment on legal matters involving Reliance Communications Limited,” says MTN spokesman Nozipho January-Bardill. Reliance has since May been in exclusive talks with MTN, which ended last Tuesday. MTN subsequently extended the deadline for talks through a reissued cautionary on the JSE. Under the new cautionary, MTN warns: “There is no certainty that these discussions will result in a transaction. Accordingly, shareholders are advised to continue to exercise caution when dealing in MTN securities.” Industry talk is that the deal could create a top-10 global telecoms firm. However, it has been plagued by media reports of a feud between the major Reliance stakeholders, brothers Anil and Mukesh Ambani. A legal agreement between the brothers gives Mukesh pre-emptive rights over Reliance shares in the event of change of management. A Mumbai court ruling in his favour has reportedly brought discussions with MTN to a halt. No one knows Irnest Kaplan, MD of Kaplan Equity Analysts, says: “No outsider can know what is going on with the deal. Until there is an announcement either way, we can't say how MTN will react.” He says Reliance would be a good fit for the company, given its strategy to make headway in the emerging markets. However, it is by no means the only possible deal for the company. “I am sure MTN is looking at many other deals,” he adds. “If the deal makes commercial sense for the company, they will follow through with it despite the hiccups. If it doesn't, they will walk away. They have done that before,” he explains. Richard Hurst, IDC programme manager for communications and networking, says the legal developments do not bode well for MTN. “If this deal doesn't go through, it will be very disappointing for the company.” A legal battle could draw out talks of a merger for months, he says. “How long will MTN have to wait? Perhaps there is another fish to fry.” Waiting for clarity Earlier this year, MTN walked away from a potentially lucrative deal with another Indian telco, Bharti, after negotiations failed to yield a suitable transaction structure. In April, it rejected a non-binding approach by Saudi-based Oger Telecoms, and earlier this year it was linked to a potential Telkom/Vodacom/Vodafone deal, which has not yet materialised. While MTN has extended talks with India-based Reliance Communications for another two weeks, the short exclusivity period might be an indication that the South African operator's patience is wearing thin. MTN shareholders are also showing a little scepticism. The company's share shed R4.25, or 3.42%, to close at R120 on the JSE on Friday. There was no trade this morning, as an IT error prevented the exchange from opening. Reliance shares closed 2.2% higher on India's National Stock Exchange after a day of directionless trade on the back of investor uncertainty. Reliance had not responded to queries by the time of publication. By Ms.Bobby Aanand, Metropolitan Jury.

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