/ 9 June 2008

Reliance, MTN agree ‘broad contours’ of deal

India’s Reliance Communications and MTN have agreed “broad contours” of a deal to create a global telecoms powerhouse but are still working out share swap details, a report said on Monday.

Under a deal, Reliance Communications would become the largest single shareholder in MTN and the South African giant would be the biggest holding company of the Indian telecoms firm, India’s leading financial daily the Economic Times said.

“Both parties are learnt to have agreed on the broad contours of the deal,” the newspaper said, basing its report on unidentified sources.

A spokesperson for Reliance Communications, India’s second largest mobile firm, declined to comment on the possible tie-up, which would create an 116-million subscriber base, eclipsing most Western mobile phone businesses.

However, the two sides have yet to decide the share-swap ratio under which RCom chief Anil Ambani would transfer his stake in the Indian company in return for a holding in MTN, the newspaper said.

Ambani wanted 66 MTN shares for 100 RCom shares while MTN was seeking 51 MTN shares for 100 Reliance Shares, the report said, adding a top RCOM team was at MTN’s headquarters in Johannesburg and was due back Tuesday.

In addition, the two sides were discussing the post-merger entity’s management structure with both favouring keeping existing top personnel in “most geographies”, the newspaper said.

But Ambani would join the MTN board as either chairperson or co-chairperson. MTN CEO Phuthuma Nhelco was expected to keep his current role, according to the report.

Another leading Indian financial daily Business Standard said RCom and MTN were “close to a share swap deal”.

“Discussions are at an advanced stage and the valuation of the company will be fixed only after due diligence is completed,” expected to be by next week, it reported, quoting a source it said was familiar with developments.

RCom entered tie-up talks with MTN late last month after rival Bharti Airtel, India’s largest mobile firm, hung up on discussions with Africa’s biggest cellular operator in a dispute over control.

RCom, which has 48 million subscribers, is valued at $28-billion while MTN, which has 68-million subscribers in 21 markets in Africa and the Middle East, is valued at $38-billion.

Analysts expect any deal to offer a premium of over 20% which would value MTN at over $45-billion. – AFP