Brothers Squabble Over Indian Telecom Merger

The proposed merger between MTN Group in South Africa and Reliance Communications has run into trouble with Reliance Industries, a rival company, claiming that it has the right of first refusal to buy a controlling stake in Reliance Communications.

Once part of the larger Reliance Group, Reliance Communications and some other companies came under the ownership and management of Anil Ambani in 2006, after a family squabble, even as brother Mukesh Ambani got to keep Reliance Industries and the group's petrochemical business.

Reliance Communications informed the Bombay Stock Exchange in May that it had entered into exclusive negotiations with MTN for a "potential combination of their businesses." Earlier, Bharti Airtel, another large Indian mobile services provider, said that it had disengaged from talks with MTN after the South African company had insisted that after the merger, Bharti Airtel should be a subsidiary company of MTN.

Reliance Communications has described the claim by Reliance Industries, that it has a right of first refusal, as "factually untenable, baseless, and misconceived." While the talks between MTN and Reliance Communications continue, it is not clear yet whether Reliance Industries will move Indian courts to press its claim to right of first refusal on the sale of a controlling stake in Reliance Communications. Reliance Industries was not immediately available for comment.