Reliance Communications and MTN mutually agree to end talks, reports CNBC-TV18. RIL’s claim of right of first refusal, or RoFR on R-Comm shares had cast a shadow on the deal. R-Comm said it is unable to presently conclude the transaction due to legal issues.
R-Comm and MTN had been in exclusive talks since late May. On Thursday, RIL had initiated arbitration proceedings on the claim.
According to CNBC-TV18's Sandeep Gurumurthi, MTN was sceptical about the prolonged legal battle between R-Comm and RIL. This is possibly the reason that led to the fallout of the deal. Anil Ambani had agreed to dilute the 66% stake that he held in R-Comm to go through with the deal. But the temperature was too hostile to come to an agreeable settlement. They had to work out another structure, which looked imminent. The logical reason one can derive would be that R-Comm did indeed agree that the RoFR claim actually exists and MTN was wary about being dragged into a legal battle. However, MTN may not be too keen on going back to the Bharti deal as the Chairman of MTN was clear that he did not want to make MTN a subsidiary of any foreign company, which was why the Bharti-MTN had fallen through.
Dobek Pater, Telecom Analyst, Africa Analysis Team CC, said MTN was hoping to extend the exclusivity of negotiations so that something major results. “But once the arbitrator has actually come into the fore, MTN realizes that arbitration would take a bit of time. It doesn’t have any interest to sit on the sidelines and watch the two parties argue in the Court of Arbitration and wait for a result of that. They could be just as well talking to someone else during that time. They are not getting anything by waiting.”
Excerpts from CNBC-TV18’s exclusive interview with Dobek Pater:
Q: We have had the RoFR claim being put forward by Reliance Industries for a while now, but finally it seems that the MTN board has decided that it is not worth its while to actually get involved in litigation. Do you think it was finally the MTN board’s decision on not wanting to get involved with any international litigation that pulled them out of this deal?
A: MTN was hoping to extend the exclusivity of negotiations so that something major results. But once the arbitrator has actually come into the fore, MTN realizes that arbitration would take a bit of time. It doesn’t have any interest to sit on the sidelines and watch the two parties argue in the Court of Arbitration and wait for a result of that. They could be just as well talking to someone else during that time. They are not getting anything by waiting.
If the potential deal between Reliance Communications and South Africa’s MTN were of such critical importance, the latter would have been willing. However, if we take into account the fact that they have had quite a few suitors over the past 18 months, there are other parties they could talk to.
Q: There is speculation that MTN and Bharti could perhaps re-engage. Given what has transpired with R-Comm, MTN may even consider changing the structure that it had presented to Bharti. Do you think that is a possibility?
A: Definitely. If MTN does re-engage with Bharti, they will have to lower down expectations. The criteria that made the deal break the last time around would have to be re-visited. MTN will have to be a bit more accommodating to Bharti in order for this to succeed.
However, I don’t think they may not necessarily go back to R-Comm once arbitration has been completed and nothing has transpired with MTN or the other party globally. Those talks can pick up or continue again as long as exclusivity with the other party lapses or it might simultaneously talk to both parties.