Reliance, MTN Extend Merger Talks

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Reliance Communications of India and MTN of South Africa have extended their period of exclusive negotiations to July 21 in their bid to merge the two telecommunications companies.

Reliance Communications announced May 26 that it had entered into exclusive negotiations with MTN for a period of 45 days for a potential combination of their businesses. The exclusivity of the negotiations meant that MTN would not negotiate a merger with any other company during this period.

The merger talks came under fire from Reliance Industries, a rival company, which said that it had the right of first refusal to the disposal of the controlling stake held in Reliance Communications.

Backed by the Ambani family, Reliance Communications and some other related companies came under Anil Ambani, after he and his brother Mukesh Ambani divided the business empire built by their father. Mukesh Ambani is the chairman and managing director of Reliance Industries.

The dispute over the proposed merger with MTN came to a head Monday, with Reliance Industries threatening legal action.

Anil Ambani had planned to swap his controlling stake in Reliance Communications with MTN in return for a significant stake, which would still leave him in control of the merged entity, according to sources close to the situation.

With Reliance Industries threatening to challenge in court any plan involving transfer of the controlling equity in Reliance Communications, Anil Ambani will have to look at restructuring the deal in a manner that will not disturb his controlling stake in Reliance Communications. The extension of the negotiation period between MTN and Reliance Communications may also be an occasion for winding down the talks, before finally abandoning the merger plan some sources said.

Earlier merger talks between MTN and another Indian telecommunications company, Bharti Airtel, broke down after disagreement on the structuring of the merger. MTN had insisted that after the merger, Bharti Airtel should be a subsidiary company of MTN. Key shareholders in Bharti Airtel like the Bharti family and Singtel would in return hold a majority stake in MTN, Bharti Airtel said in May.

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