MUMBAI (Thomson Financial) - India's Reliance Communications Ltd. (RCom)
said it is unable to conclude its proposed $66 billion merger with South
Africa's mobile operator MTN Group Ltd., "owing to certain legal and regulatory
issues".
RCom said the two parties have mutually decided to call off talks and allow
the "exclusivity agreement" to lapse.
On May 26, Anil Ambani-controlled RCom entered exclusive talks to combine
with MTN to build a telecoms giant that would reach from Asia to Africa to the
Middle East with a market capitalisation of up to $70 billion.
On July 9, both the companies decided to extend the period of exclusivity
for their potential merger negotiations till July 21.
Elder brother Mukesh Ambani-controlled Reliance Industries Ltd. (RIL) has
been seeking to block the deal, claiming first right of refusal to buy a
controlling stake in RCom, based on an agreement dated January 2006.
RIL on Thursday issued a fourth letter threatening legal action against the
deal, with Rcom saying the notice was "legally and factually unwarranted".
Analysts say the market had already discounted the possibility of a deal
when the exclusivity period was extended on July 9, with media reports
speculating that MTN could not have taken bold steps, ignoring RIL.
"But now as the puzzle is over [whether] investors will be emboldened to
re-enter the stocks at lower levels. RCom's stock will look up on its robust
standalone performance," said VVLN Shastri, country head of Firstcall India
Equity Advisors.
Gaurang Shah from brokerage Geojit Financial Services also expects a rise of
about 4-5 percent in the RCom stock when the markets open Monday, as investors
who were earlier spooked by the prospect of a possible litigation will now be
relieved and turn to the scrip's strong fundamentals.
MTN too said shareholders "need not now be cautious when dealing in MTN
securities."
Ahead of the announcement, RCom shares closed 4.14 percent higher at 435.20
rupees on the Bombay Stock Exchange, while the benchmark Sensex closed 3.99
percent up at 13,635.40.
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