Brothers’ row threatens Reliance merger
Mukesh Ambani, India’s richest man, has claimed he has the right of first refusal to buy his estranged brother’s mobile group, Reliance Communications (RCom), in an apparent bid to derail the company’s $70 billion merger talks with MTN, Africa’s largest wireless group.
Mukesh’s Ambani claim, which could jeopardise the creation of what would be one of the world’s ten largest telecoms groups, was immediately disputed by his brother, Anil, who is India’s second richest man.
RCom said in a statement: “Last night, in a mala fide effort to disrupt the talks, Reliance Industries (RIL), part of the Mukesh Ambani group, has sent a communication to MTN, making a false claim of an alleged right of first refusal to buy the controlling stake in RCom.”
It added: “RIL’s claim is legally and factually untenable, baseless, and misconceived.”
The development marks a fresh low in the combative relationship between the subcontinent’s wealthiest siblings. Their father, Dhirubhai Ambani, who built the Reliance empire, died without leaving a will in 2002. At that time Mukesh took over the running of the business, a situation that frustrated Anil. By 2004, the pair were squabbling publically. Following an intervention by their mother, Anil left with nearly 30 per cent of the business.
Anil Ambani’s spokespeople said that RIL had based its claim over RCom on an agreement dated January 12, 2006 – when RCom was still under Mukesh Ambani’s control. Anil Ambani claim’s that the document was signed only by RIL representatives and was rendered void when control of the mobile unit moved to him – just days later.
RCom, which is India’s second-largest mobile group, said its talks with MTN were progressing well and that Mukesh Ambani’s claim over the group “is born out of mounting despair and frustration at [his brothers company’s] continuing successes.”
RCom and MTN entered a 45-day period of exclusive talks on May 26, after Bharti Airtel, India’s largest mobile operator, dropped out of negotiations with the South African group. A combination of RCom and MTN would boast 116 million subscribers and footholds across Africa, India and the Middle East – some of the most attractive emerging mobile markets.
It is thought that Anil Ambani has been discussing exchanging his 66 per cent stake in RCom for a 34.9 per cent stake in MTN. Various permutations – some of which would involve Mr Ambani retaining a stake in RCom or bringing aboard private equity investors – also remain possible, if a deal is reached.
An MTN spokesman said: “As far as we are concerned nothing has changed. We are continuing talks.”
