Reliance Communications slides

Reliance Communications shed 2.80% to Rs 408.10 at 10:04 IST on BSE on reports Chairman Anil Ambani will pick up 51% in South African telecom company MTN group through a cash and share swap.

The stock hit high of Rs 410.90 and low of Rs 395.05 so far in the day. The stock had hit 52-week high of Rs 844 on 10 January 2008. It had hit 52-week low of Rs 381.05 on Thursday, 3 July 2008.

India’s second largest listed cellular services provider by sales has an equity capital of Rs 1032.01 crore. Face value per share is Rs 5.

The current price of Rs 408.10 discounts its Q4 March 2008 annualised EPS of Rs 27.90 (based on the consolidated financial performance), by a PE multiple of 14.62.

Reports added that the RCom-MTN group merger deal requires more scrutiny by MTN, as a result of which today’s, 8 July 2008 deadline for the 45-day ‘exclusivity pact’ might be extended by three or four weeks. Under the exclusivity pact MTN was obliged not to talk to competing companies.

MTN shareholders, which comprise the family of the former Lebanese prime minister Najib Mikati and Newshelf664, a holding company of the management and employees, will get cash and shares in RCom and the aim is to make it an MTN majority controlled company. Anil Dhirubhai Ambani Group (ADAG) and associates, however, will hold control over both companies by virtue of becoming 51% shareholders in MTN.

The structure of the deal is designed to ensure that ADAG retains its shareholding in RCom and sidestep the controversy that arose over the right of first refusal stipulation demanded by Mukesh Ambani-controlled Reliance Industries.

A deal looked unlikely on Tuesday, the day when the 45-day exclusivity ends, as a dispute between Reliance Communications and Reliance Industries (RIL) remains unresolved. On 26 May 2008, Reliance Communications (RCom) had first informed the bourses that it has entered into exclusive negotiations with MTN Group for 45 days soon after the South African giant aborted its talks with the Sunil Mittal-controlled Bharti group. RIL has staked a right of first refusal on Reliance Communications shares, but RCom maintains that the claim is untenable.

Reliance Communications said on Monday, 7 July 2008, it was prepared to meet Reliance Industries next week to clarify any doubts adding the meeting was not part of "conciliation" or "dispute resolution". Reliance Industries said representatives from Reliance Communications had not turned up to a meeting it had set up for Monday to begin a process of mutual conciliation, and so said it "is left with no alternative but to adopt appropriate proceedings against Reliance Communications, as advised."

The MTN-Reliance Communications merger, if it gets through, will create a telecom behemoth of 115 million subscribers in 25 countries.

Reliance Communication (RCom)’s consolidated net profit jumped 47% to Rs 1503.26 crore on 36% growth in sales to Rs 5250.01 crore in Q4 March 2008 over Q4 March 2007.

RCom provides telecommunication services. The company provides wireless, wire line, voice, data and Internet communication services