THE war of letters between Anil Ambani’s Reliance Communications (RCom) with Mukesh Ambani’s Reliance Industries (RIL) is increasingly assuming ludicrous proportions. The media and public relations war escalated the day before its 45-day exclusive period for merger talks with the South African telco MTN expires on Tuesday. MTN and RCom are expected to update the stock exchanges on the status of their negotiations on Tuesday. The bone of contention this time was an aborted meeting between representatives RCom and RIL on Monday morning.
The blame game has reached its crescendo on Monday with RIL charging RCom with “misleading media.” The RIL spokesperson said late on Monday evening that no RCom representative turned up to meet RIL at a meeting scheduled for Monday morning. This came within a couple of hours of RCom informing the media that it has invited RIL to meet in the week beginning July 14 “to clarify any doubts” on the deal structure being discussed with MTN.
The RIL spokesperson said: “RIL, on July 2 invited RCom to participate in a meeting at 11am today (July 7, 2008) to commence the process of mutual conciliation under the non-competition agreement. No representative of RCom turned up at the meeting. RIL delivered a letter to RCom at 1.49 pm today placing on record the fact that no representative of RCOM turned up at the venue for the meeting at the scheduled time. RIL received a response from RCom at 2.23 p.m. refusing to participate in the meeting.”
RCom sources said they did not attend the meeting with RIL as the meeting was slated to discuss “conciliation”. High-stakes game of brinkmanship
THEY said: “There is no grounds for conciliation as RIL’s so-called claims on right of first refusal (ROFR) is untenable. We are ready to meet them to clarify details of the deal being discussed with MTN.” RCom reiterated these points in a fax sent to RIL 2.23 PM on Monday afternoon.
RIL turned down this offer. In a response to RCom’s afternoon fax, RIL has threatened to take legal action against RCom in view of the latter’s “refusal to participate in conciliation process as envisaged in the agreement.” It has also reiterated that it has already invoked the dispute resolution clause of the non-competition agreement, which was signed between RIL and various Anil Dhirubhai Ambani Group (ADAG) firms in January 2006 in order to implement the demerger of business between the Ambani brothers.
The two sides seem to be engaged in a highstakes game of brinkmanship as the negotiations between RCom and MTN enter the final stretch. With credit markets tightening and capital markets slumping around the world the legal uncertainties would not make matters easier for RCom.
The bone of contention lies in the January 2006 agreement. RIL claims that this agreement provides it a right of first refusal (ROFR) in case RCom is sold to a third party. RCOM denies any such right. These developments come amidst speculations that MTN is wary of legal challenges to the deal. Besides, unconfirmed reports said that MTN would agree to continue talks with RCOM only if had an assurance that Mukesh Ambani would drop his claims of RoFR and not derail the transaction.
Analysts share the view that the South African company would not want to be part of a combined entity whose future is uncertain. RCom shares ended the day down 4.2% at Rs 419.80 rupees, even as the Mumbai market rose 0.5%.
