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Big brother Mukesh squeals on Anil Ambani’s MTN deal

Almost three years after Kokilaben Ambani announced on June 18, 2005 an “amicable settlement” between her warring sons...

Written by Enseconomicbureau | New Delhi | June 14, 2008 12:10:39 am

Almost three years after Kokilaben Ambani announced on June 18, 2005 an “amicable settlement” between her warring sons, Anil and Mukesh, the feud between the two has boiled over once again with the Mukesh Ambani-controlled Reliance Industries now putting a spoke in the proposed deal between Anil Ambani’s Reliance Communications (RCOM) and South African telecom giant MTN.

RCOM and MTN have been in merger talks for about three weeks now. They initiated exclusive talks on May 24 for a combination that could be valued between $45 billion and $50 billion. Negotiations are moving in such a direction that Anil Ambani will be the largest shareholder in the merged entity.

Mukesh Ambani’s RIL has now shot off letters to RCOM and MTN stating it has the first right of refusal to buy controlling stake in RCOM. The younger brother’s Anil Dhirubhai Ambani Group (ADAG) has a controlling 65 per cent stake in RCOM, the second largest private telecom operator after Bharti Airtel in India.

Anil Ambani, however, refuted his elder brother’s claims and said no such agreement was ever entered into with RIL. An MTN spokesperson in South Africa, meanwhile, said that as far as MTN was concerned nothing had changed and talks were proceeding as per the cautionary announcement made by it in May.

The two brothers have often locked horns in interpreting the family settlement announced by Kokilaben three years back. There have been differences over the nature of businesses each of them can enter into and also on the control of the various businesses of the empire built by their father Dhirubhai Ambani. The latest salvo by Mukesh Ambani’s RIL is being seen in this context by industry observers.

An RCOM official said that RIL’s first right of refusal claim was based on an agreement of January 12, 2006, unilaterally signed only by RIL executives when RCOM was under RIL control. The Bombay High Court had, however, held this as “unfair and unjust” vide its judgement of October 15, 2006.

An RIL spokesperson said, “RIL has in good faith notified both the ADAG and the MTN Group of the stipulation contained in an agreement, the validity of which has never been questioned so far by ADAG.”

According to RCOM, the only reason why RIL was taking such a “disruptive action” was it did not want the RCOM-MTN deal to fructify. If the deal consummates, the Reliance-MTN combine would become a mammoth group with presence in a large number of countries, it said.

Before the Reliance Group companies formally split in early 2006, RCOM was under Mukesh Ambani’s control. RCOM and Reliance Energy were given to Anil Ambani as part of the settlement of June 2005. The brothers are already locked in a legal battle over supply of gas from RIL’s KG basin to ADAG’s power unit at Dadri.

“RIL’s claim is born out of mounting despair and frustration at Reliance ADA Group’s continuing successes, and the support it enjoys from over 10 million investors, the world’s largest shareholding family,” RCOM said.

WHAT’S THE FUSS?

The roots of The spat

Before the Reliance Group companies formally split in early 2006, RCOM was under Mukesh Ambani’s control. RCOM and Reliance Energy were given to Anil Ambani as part of the settlement of June 2005.

first right of refusal

RIL’s right of first refusal claim was based on an agreement of January 12, 2006, unilaterally signed only by RIL executives when RCOM was under RIL control. The Bombay High Court had, however, held this as “unfair and unjust”.

IS IT VALID?

RIL says it has in good faith notified both the ADAG and the MTN the stipulation the validity of which has never been questioned so far by ADAG

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