MTN could find a friend in Reliance

Marcia Klein

Marcia Klein

The buyout of a UK company by India's second biggest mobile operator Reliance Communications indicates it is on the acquisition trail.

But its talks with MTN could be more about a joint venture than a buyout, hence the sharp drop in MTN's share price.

Ideally, MTN investors would prefer a buyout, with a premium set by the buyer.

Reliance, which has announced it is in exclusive discussions with MTN, said yesterday it had bought network services provider Vanco for $77million (R593million) through Reliance Globalcom.

The deal is not large, but points to Reliance's appetite for growth.

Reliance is now in exclusive talks with MTN (for 45 days) after MTN said yesterday that talks with Bharti, which is India's number one mobile company, had ended after the two failed to agree on how the deal would take shape.

Similar difficulties could face its dealings with Reliance as the company is much smaller than MTN.

Renaissance Asset Management director Khulekani Dlamini said that given the relative sizes of the two companies, he expected talks would be around a joint venture rather than a buyout of MTN.

Reliance Communications chairman Anil Ambani was quoted by Reuters as saying a deal with MTN could "provide investors, customers and the people of both companies a global platform for exponential growth".