RIL: Anil can't do RCom-MTN deal

War has again broken out between the Ambani brothers. On Thursday, Reliance Industries (RIL), controlled by Mukesh Ambani, sent a bolt from the blue to South African telecom giant MTN, which is in talks with Anil Ambani's Reliance Communications for a mergeracquisition: Not so fast, there are family settlement issues involved before you can move any which way. The missive became public late on Friday.

The salvo threatens to put a spanner in the works of what is billed as the largest merger or acquisition deal in the making by an Indian company.
In a convoluted share-swap agreement, Anil was supposed to part with a portion of his stake in RCom for a slightly less than 35% stake in the merged RCom-MTN entity.
However, MTN said "nothing has changed, talks continue."
"As far as MTN is concerned nothing has changed. We are continuing with our dialogue," MTN spokesperson Nozipho-Bardill told PTI over phone from Johannesburg. Asked if RIL's communication to MTN claiming first right of refusal to buy the controlling stake in RCom would have any bearing on talks, she said "we are in the middle of talks...nothing has changed."
A statement from RIL said, "RIL has in good faith notified the Reliance ADAG group and the MTN group of the stipulations contained in an agreement, the validity of which has never been questioned so far by Reliance ADAG."
The RIL stand appears to be that the Ambanis' secret document on ownership settlement offers a right of first refusal, implying RCom may have to be offered to Mukesh before being sold to anyone else.
The family settlement was signed in August 2005 after a raging battle fought in the boardroom and in the public domain by the two brothers.
The ownership settlement clearly demarcated the businesses between the two brothers.
Mukesh gave away to Anil the telecom business he built from scratch and kept the lucrative petroleum and petrochemical business.
An RIL spokesperson declined to comment. But the Reliance ADA group, a three-year old business house, was quick with a riposte.
"RIL is seeking to disrupt the creation of one of the world's most valuable telecoms combinations, which will make over a billion Indians proud of our great country," an ADAG spokesperson said.
"RIL's actions are clearly anti-consumer, anti-investor and anti-globalisation, and against the vision, beliefs and principles of the founder of the Reliance Group, late Dhirubhai Ambani. Reliance Communications dismisses RIL's claim with the contempt it deserves," an RCom statement added.
The Anil Ambani group alleged: "Last night, in a mala fide effort to disrupt the talks, RIL, 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 RCom.
Not surprisingly, RIL has sent the letter to RCOM only today i.e. after a gap of 24 hours."
RCom was served the copy of the letter sent to MTN on Thursday as late as 5.30 pm, on Friday.
For Anil, there is a lot at stake in the MTN deal.
If MTN and RCom join hands and Anil becomes the principal promoter of the merged group, it would mean that his telecom network will straddle the Earth from the Cape of Good Hope to the Himalayas.
A possible merger will also create a telecom giant with a subscriber roster of over 100 million customers, on two continents which promise a lot of scope for growth.
It remains to be seen whether the RIL missive will hamper merger acquisition talks, although RCom officials claimed it will have no effect.
"MTN knows. The discussions are ongoing. RIL's claim is legally and factually untenable, baseless, and misconceived," the RCom official said.
But an analyst said any seller will be afraid of a litigation. Sources said MTN is expected to go on a conference call to update investors on the developments.
According to RCom, RIL has based its claim on an agreement of January 12, 2006, which was unilaterally signed only by RIL's officials when RCom was under RIL's control, under a procedure which the Bombay High Court, vide its judgment dated 15th October 2006, has held to be "unfair and unjust."
RIL's claim is born out of 'mounting despair and frustration' at Reliance ADA Group's continuing successes, RCom officials claimed.
Reliance Communications had informed the stock exchanges on May 26, 2008, that it has entered into exclusive negotiations with MTN Group for a period of 45 days, for a potential combination of their businesses.