Reliance Communications in acquisition talks with MTN after Bharti withdraws

Anil Dhirubahi Group telecom firm Reliance Communications Ltd, today disclsed that it had entered into exclusive talks with the South African mobile services firm MTN, after rival Bharti Airtel decided to call off its acquisition discussions, blaming MTN for moving away from the agreed financial structure of the proposed deal that would have it the parent company and refduced Bharti's shareholders to a minority. (See: Bharti calls off talks with MTN; alleges breach of terms of agreement)

This is the second time Reliance and MTN will be engaged in discussions as they had earlier held talks for a partnership in February 2007. Reliance said in a statement that it had entered into a 45-day exclusivity period with MTN to explore a potential combination of the two telecom operators' businesses.

"The negotiations are curently taking place and a further announcement will be made when appropriate," said Reliance.

The statement quoting chairman Anil Ambani, said, "We are delighted to be engaged in exclusive negotiations with MTN Group to achieve a partnership, which would provide investors, customers, and the people of both companies with a unique and global platform for exponential growth, creating substantial long term shareholder value."

However, it said that there was no certainity either on the completion ogf the deal or its timimg and cautioned shareholders "to exercise caution int their dealings in their dealings in the companies' securities" till an announcement was made.

Reliance has claimed a customer base of 48 million that include 1.5 million individuasl overseas customers, but 20 million short of the South African company's. Moreover, its market value of $27.5 billion is about $10 billion below MTN's. However, its profits of $1.4 billion on $4.8 billion in revenue in 2007 are comparable to MTN's $1.6 billion, on twice Reliance's revenue.

Any combination of the two would have about 116 million customers, just below the 120 million that a combined Bharti and MTN would have had.

Reliance's larger rival and India's largest private telecom carrier Bharti had been in prolonged negotiations with MTN, with the influential Mikati family that holds a 9.8-per cent direct stake in MTN, having backed Bharti's proposed acquisition of MTN that would have created the world's sixth largest telecom business, were called-off when MTN moved away from the terms of the agreement to create new demands tthat would have resulted in Bharti Airtel becoming a subsidiary of MTN. IT also raised emands for exchanging majority shares of Indian company held by Sunil Mittal, promoter of Bharti, family and its foreign partner Singtel, in exchange for a controlling stake in MTN.