Reliance Communications forays into MTN bid talks

26 May, 2008:

With Bharati Airtel has withdrawn from Merger talks with South African company MTN, another Indian company entered the bid with a big bang. Two days back, Bharti Airtel had pulled out of negotiations to acquire an estimated 50 billion dollar MTN. Now it is the turn of Anil Ambani group company Reliance Communications. It has expressed interests in starting discussions for a possible tie up with the South African telecom entity.

According to reports close to the company Reliance Communications has evinced keen interest in taking majority stake in the MTN. Bharti Airtel decided to pull out of the negotiations as MTN had changed proposed a structure of the merger. They had demanded for making Bharti Airtel a subsidiary of the South African company, contrary to the agreed terms between the two firms.

Wall Street Journal today reported that the Reliance Communications is in talks to combine with South African cell phone company MTN Group. It is reported that "the discussions may go nowhere and precise details of the Reliance tie-up being discussed could not be learned, though one person said a deal may be structured as a purchase of Reliance by MTN." The combination of MTN and Reliance Communications would create a global wireless major; larger than developed-market giants such as AT&T Inc.

The Bharati group withdrew from the deal terming proposal by MTN was "unacceptable. If the deal becomes successful it would have created the world's sixth-largest wireless telecommunications concern, bringing together two major mobile players operating in emerging markets in different parts of the world. The combined market value of the merged entity would have been nearly $80 billion and more than 130 million customers across Asia, Africa and the Middle East.

Reliance Communication has been planning for global business expansion through acquisitions in the major markets. It is believed that MTN acquisition would give them a strong foothold in African market.