RIL warns MTN of legal action; S. African co says talks progressing well

Split wide open

Reliance in its letter says any agreement between MTN and RCom will be a breach of the agreement between the Ambani brothers.

RCom says RIL’s claims are legally and factually untenable.

Our Bureau

New Delhi, June 14 The spat between the Ambani brothers over Reliance Communication’s (RCom) multi-billion dollar merger talks with MTN has snowballed into a major row.

The younger Ambani has threatened to claim damages from Reliance Industries Ltd if it went to court claiming first right in the event of stake sale by RCom. On the other hand, the Mukesh Ambani camp has trained its guns on the South African telecom major warning the company of legal action if it gets into an agreement with RCom.

In a letter to MTN, Reliance Industries said, “Please note that any agreement of the nature contemplated above between MTN and Anil Dhirubhai Ambani Group (ADAG) will result in MTN procuring a breach of the agreement which will entitle RIL to also make a claim for exemplary damages against MTN.”

However, both MTN and RCom said that the talks were on and progressing well.

“Nothing has changed. We are still having talks with Reliance Communications,” an MTN spokesperson told an international news agency.

RIL letter

Mr Mukesh Ambani-backed RIL has also sent a letter to RCom claiming first right of refusal if Mr Anil Ambani decides to sell equity to South African telecom company.

In response, RCom has shot off a letter to RIL that its claim was legally and factually untenable, baseless, and misconceived. RCom has also stated that if RIL chooses to take any legal action, the same will be vigorously defended and RCom will claim costs and damages from RIL. RCom further stated that there is no question of taking note of any alleged rights on RIL’s part.

“The use of threatening and coercive language by Reliance Industries Ltd, India’s largest private company, with MTN, a globally respected telecom major, is very unfortunate. The tone of the letter clearly indicates that it is part of a mala fide design, with no substance, to simply try and disrupt talks between RCom and MTN, by raising the false bogey of litigation and damages. RIL’s action in sending copies of the letter to a large number of banks and intermediaries, without even first communicating with RCom, further reflects its ulterior and mala fide motives,” said an RCom source.

The controversy started on June 12 when RIL sent a letter to MTN saying that according to an agreement signed on January 12, 2006 with various Reliance companies, RIL has a right of first refusal in respect of transfer of shares of RCom Ltd by the Reliance Dhirubhai Ambani Group.

Reacting to the RIL letter, RCom said that it was surprising that, without knowing the contours of a possible transaction between RCom and MTN, RIL has jumped to a “baseless conclusion that the same is covered by the alleged agreement dated January 12, 2006, which in any case was unilaterally signed only by RIL’s officials.

“It is regrettable that RIL, for its own vested interests, is only seeking to disrupt the creation of one of the world’s most valuable telecoms combinations, which would make over a billion Indians proud of our great country.”

RIL spokesperson said that the letters were sent in good faith to the two companies and ADAG had never questioned the said agreement previously.

Differences between the two brothers in the telecom sector dates back to 1999 when the undivided Reliance Group was deciding on its future strategy for this booming sector. While Mr Anil Ambani was in favour of deploying GSM technology, Mr Mukesh Ambani picked CDMA for rolling out pan-Indian mobile services.

This is also not the first time when the family agreement has become the bone of contention. The dispute between the two brothers over RIL selling gas to third party is also being argued in the Bombay High Court around this agreement.

Related Stories:
Reliance Comm-MTN merger talks could be in trouble
RCom, MTN inch closer to sealing merger deal
Reliance Comm opens exclusive talks with MTN

(This article was published in the Business Line print edition dated June 15, 2008)
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