Reliance, South Africa’s MTN confirm merger talks (Roundup)

May 26th, 2008 - 8:44 pm ICT by admin  

Mumbai/Johannesburg, May 26 (IANS) The Reliance Anil Dhirubhai Ambani Group and telecom services giant MTN announced their consolidation talks Monday, two days after the Bharti group called off its negotiations with the South African company. “Reliance Communications and the MTN group have agreed to enter into exclusive negotiations with respect to a potential combination of their businesses,” the Mumbai-based group’s telecommunications arm said in a statement.

The group said the two entities have also agreed upon a 45-day exclusivity period to work out the modalities, during which neither party would negotiate with any other entity.

“There is no certainty either on completion, or the timing of the said proposal. In the meantime, shareholders are advised to exercise caution in their dealings in the companies’ dealings until a further announcement is made,” the group’s statement said.

In South Africa, MTN spokesperson Pearl Majola told IANS the company has nothing further to add to a short statement issued via the Johannesburg Securities Exchange.

The statement said: “Shareholders are advised that, subsequent to MTN’s cautionary announcement on SENS on Monday, May 5, 2008, (which noted the discussions with Bharti Airtel) MTN has been approached by the Reliance Communications Group with regards to a potential business combination between Reliance Communications Limited and MTN.

“MTN has agreed to enter into exclusive negotiations for a period of up to 45 days in respect of such potential combination. There is no certainty that these discussions will result in a transaction. Accordingly, shareholders are advised to continue to exercise caution when dealing in the company’s securities until a further announcement is made.”

MTN shares plunged by seven percent after rising dramatically in the wake of the speculation over its merger with Bharti Airtel.

Reliance is looking at MTN’s 70 million customers in 21 countries, including South Africa, Nigeria, Iran and Cyprus and its attractive balance sheet that shows a net profit of $1.58 billion on revenues of $9.62 billion.

The Anil Ambani-led company also has in its fold 48 million customers, covering 15,000 towns and 400,000 villages in India on a network of 165,000 km of optic fibre cables.

“We are delighted to be engaged in exclusive negotiations with MTN group to achieve a partnership, which would provide investors, customers and the people of both companies a unique global platform for exponential growth, creating substantial long-term shareholder value,” Ambani said.

The discussions between Bharti Airtel and MTN group to create the world’s sixth-largest mobile phone company in a deal said to be worth $45 billion was formally called off Saturday.

“Discussions were on till late last night without a breakthrough. Accordingly, Bharti has decided to disengage from the ongoing talks and has conveyed the same to MTN,” the company, promoted by Sunil Bharti Mittal, had said Sunday.

The two companies were unable to come to an understanding on what the structure of the new enterprise will be, Bharti officials said. “MTN has now presented a completely different structure from what was agreed.” the company said.

Reliance marked its entry into the international mobile phone market by buying out Uganda’s Anupam Global Soft to offer mobile, fixed-line, Internet, national and international long distance services there.

The group also made a commitment to invest $500 million there towards expansion.

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