ADAG sources say the deal is all but done. The due diligence is over, and a share-swap ratio between RCOM and MTN has been cemented. An announcement is expected in mid-July, when the 45-day exclusive period of talks ends, and after shareholders and regulatory clearances are through. If all goes to plan, RCOM will pledge 66 per cent of its shares to become an MTN subsidiary. And Anil Ambani will be MTN's largest shareholder with a 35 per cent stake.
The key issue though is whether Anil will be comfortable seeing RCOM as an MTN subsidiary. A consultant who worked on part of the deal is cautious: "It's a complicated structure they are getting into. Reliance will not accept being an MTN subsidiary in the long term. There'll be some other play in it."
Of course, there are obvious benefits in a merged entity, highlighted in MTN's recent negotiations with Bharti Airtel. Reliance too will play up its low-cost model—it sells a bundled handset in India for a mere Rs 777, something even the Chinese have not been able to do. In return, MTN offers operations in over 21 countries—growing, lucrative markets—and a strong mobile commerce model.
But before all that, the hurdles. Mukesh Ambani has argued that the first right of refusal for any sale of RCOM shares would vest with him, as per a family settlement in 2006 after the Reliance group was carved into two. Going forward, it's clear that the settlement does exist, though very few people have seen it. Also, it's being contested by the ADAG group in the courts. Assuming that RCOM and MTN come out with a deal, the matter could go to the courts. Whatever be the elder Ambani's reasons (after all, he set up the company), he can play spoilsport. Then there's MTN which has built a reputation of talking mergers but not walking down the aisle. So, until Anil Ambani and MTN CEO Phuthuma Nhelko step on to the podium and shake hands, it will remain India's biggest deal-in-the-making this year.
