R Com and MTN get disconnected

There will be no merger between Anil Ambani’s Reliance Communications (RCom) and South Africa’s MTN. The two companies announced that they had mutually decided to allow the exclusivity agreement between them to lapse.The deal, which had seemed a real possibility at one stage, went off the rails after Mukesh Ambani’s Reliance Industries Ltd claimed that it had first right of refusal on RCom shares, as part of an agreement at the time of partition of the Reliance empire. The proposed deal depended on RCom and MTN agreeing on a share swap, which could not proceed once RIL stepped in.The final nail in the deal’s coffin appears to have been RIL’s decision to move for arbitration and appoint retired Supreme Court judge BP Jeevan Reddy as arbitrator .Significantly, though the exclusivity period still had some time to go and was due to lapse only on July 21, the two parties decided to call it off on July 18 itself, citing “certain legal and regulatory issues”.MTN may have developed cold feet about the deal once RIL came into the picture.RIL declined to officially comment, but sources indicated that the company would not pursue arbitration proceedings now that the deal has been called off. This outcome appears to have been anticipated for the past few days even by the Anil Ambani camp. Sources said he had been fairly relaxed for the last few days. He had reportedly been telling trusted comrades that there would be other deals even if this one fell through.The RCom-MTN-RIL triangle would have been riveting enough even as a purely business story, but it gained further drama with the addition of a political angle. Samajwadi Party leader Amar Singh, a close friend of Anil Ambani, is reported to have suggested that the prime minister should play peacemaker between the Ambani brothers and that the government should throw its weight behind the deal, as it had in the case of Lakshmi Mittal’s takeover of Arcelor. The SP has gained immense clout of late, since it has become essential to the survival of the UPA government. Mukesh Ambani met PM Manmohan Singh on Monday, further fanning speculation in political and business circles. However, both the government and RIL sources have vehemently denied that the PM sought to broker a truce between the brothers. If it had come through, the RCOM-MTN deal would have created one of the five largest mobile service providers in the world, with around 116 million customers in 22 countries. Now that they have called off talks, there is speculation that MTN might again send overtures to Bharti, its original suitor. However, it remains to be seen if Bharti, already bitten once, will be willing to shed its shyness and try again.