Mukesh calls MTN to disconnect Anil

The battle between the Ambani brothers flared up again today -- this time over the Anil Dhirubhai Ambani Group's (ADAG's) bid to seal a merger deal with South African telecom company, MTN.

Reliance Industries [Get Quote] Limited (RIL), controlled by Mukesh Ambani, last night sent a letter to the MTN board saying it has the first right of refusal to buy the controlling interest in ADAG group company Reliance Communications [Get Quote] (RCom). Anil Ambani and the promoters own 66 per cent of the company.

RIL has revisited the Ambani family settlement signed in January 2006 to claim that a decision on a majority stake sale in any of the group companies can be taken only after consultations with the parties involved in the settlement.

An RIL spokesperson said: "RIL has in good faith notified both the ADAG Group and the MTN Group of the stipulations contained in an agreement, the validity of which has never been questioned so far by ADAG." Sources familiar with the developments said RIL has also informed some of the investment bankers involved in the RCom-MTN negotiations.

RCom was, however, quick to hit back, describing RIL's claim as "legally and factually untenable and misconceived".

In a strongly-worded press release issued, RCom said that the so-called agreement of January 12, 2006, was unilaterally signed by RIL's officials, when RCom was under RIL's control. "The procedure was held by the Bombay High Court as unfair and unjust in its judgment dated October 15, 2006," the release said.

The release also said RIL's claim is "borne out of mounting despair and frustration" at ADAG Group's continuing successes, and the support it enjoys from over 10 million investors, the world's largest shareholding family."

RIL is seeking to disrupt the creation of one of the world's most valuable telecoms combinations, the release said.

RCom sources said that the letter was sent last night to MTN, but a copy of it came to them only after a gap of 24 hours. "If they actually had an issue they should have first sent us a letter, or raised their objections when we announced that talks were on. But their intention was to disrupt the ongoing talks," they said.

Asked what action RCom is planning to take on the issue, a source said: "It's just a letter and we will put it in a shredder. They can go to court and we will see."

In some relief to Anil Ambani, the MTN Group said late in the evening it is still in talks with RCom. MTN spokeswoman Nozipho January-Bardill told Reuters: "As far as we are concerned, nothing has changed. We are continuing talks as per our cautionary announcement published last month."

RCom had informed the stock exchanges on May 26, 2008, that it has entered into exclusive negotiations with the MTN Group for a period of 45 days, for a potential combination of their businesses after talks between Bharti and MTN Group failed.

The discussions are believed to be in the final stages and a deal is expected by next week.

The brothers are locked in another legal dispute as well over the gas pricing for power projects between RIL and RNRL. Corporate lawyers said both the Ambani brothers have a strong case on the first right of refusal clause and the matter would most likely end up in the courts.

In any family settlement, the first right of refusal clause is a standard clause so that if a family faction cannot run the business well, then the other should get the opportunity to run it. "If the clause is there in the Ambani brothers' agreement, then Mukesh has a strong case," said Som Mandal, a Delhi-based corporate lawyer.

"However, Anil can always claim that to grow his business, he has to go for this (MTN) arrangement. It looks like this matter is headed to the courts," he said from London.