Sibling rivalry sinks MTN-Reliance deal; MTN open for offers

Threatened legal action between India’s billionaire brothers over Reliance Communication’s potential merger with Africa’s MTN Group, has ended negotiations which would have resulted in an emerging markets telecoms giant worth US$66 billion.

Ongoing feuds between brothers Anil and Mukesh Ambani ruined Reliance’s chances of merging with MTN.

Anil Ambani controls Reliance Communications (RCom) which had been in dialogue with MTN since May 26 and had extended talks until July 21.

However, Anil’s older brother Mukesh Ambani, who controls Reliance Industries Ltd (RIL) blocked the deal, claiming first right of refusal to buy a controlling stake in RCom, based on an agreement dated January 2006.

“Owing to certain legal and regulatory issues, the parties are unable to conclude a transaction,” MTN said in a statement. “Accordingly, it has been mutually decided to allow the exclusivity agreement to lapse.”

If the deal had gone ahead, MTN and RCom would have created a global top ten telecommunications group serving 120 million customers in two dozen countries across Asia, Africa and Middle East.

RCom would have also surpassed rival Bharti Airtel, currently India’s largest operator.

After failed talks with Indian companies Bharti Airtel and RCom, analysts suggest interest may move to a tie-up with Middle Eastern operators based in Bahrain, Saudi Arabia or Kuwait.

Two months ago, UAE-based Etisalat had confirmed it was considering MTN as part of its expansion strategy in Africa, where currently 11 of its 16 operations are based.

“We are evaluating MTN among other companies,” Etisalat chairman Mohammed Omran stated in May. “I see that within three to four years, revenue from Africa will not be less than 25 per cent.”

Etisalat group’s total subscriber base is 64 million and it has no shortage in cash were it to pursue a deal, after last week announcing consolidated net profits for the first half of 2008 at AED5.12 billion (US$1.39 billion).