Anil Dhirubhai Ambani Group (ADAG)-owned Reliance Communications has started negotiations with South Africa-headquartered MTN for a part-cash part-equity deal. Sources close to talks said Anil Ambai, chairman, ADAG group, is personally involved in negotiations with MTN promoters and top management.

The size of the deal will be somewhere between $45 billion and $50 billion. The exact ratio of cash and equity has not yet been worked out. But the sources said that ADAG was initially basing the negotiations with a 50:50 cash-stock deal in mind.

When contacted, Reliance Communications (RCom), however, denied any talks with MTN. “The company is not involved in discussions with MTN,” an RCom spokesperson said.

The Rs 19,068-crore Reliance Communications, which posted profits of Rs 5,401 crore in 2007-08, is the second largest mobile service provider in India after Bharti Airtel. It has a subscriber base of about 47.2 million. Its market cap is more than Rs 1,20,000 crore. MTN has a total subscriber base of 68 million customers. Therefore, the combined subscriber base of the merged entity, if the deal fructifies, will be 132 million.

MTN operates services in Africa, Iran, Afghanistan and Syria. These are high potential markets. Some analysts have estimated that MTN has a potential to accumulate up to 240 million subscribers in these markets by 2012.

Yesterday, the proposed Bharti-MTN deal was called off. Bharti Airtel blamed MTN for failure of the deal. It said MTN backed out of the proposal that was initially agreed upon by the two through their bankers on May 16. Now, MTN wants Bharti Airtel to become its subsidiary and exchange majority shares of the Indian company held by the Bharti family and Singtel, in exchange for a controlling stake in MTN.

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