UPDATE 1-Ambani share dispute deepens on arbitration move
(Recasts, adds details, Reliance Comm and analyst comment)
MUMBAI, July 17 (Reuters) - A feud between India's billionaire Ambani brothers escalated on Thursday with older sibling Mukesh starting arbitration proceedings over a claim on share rights in a move likely to further complicate his brother's talks with South Africa's MTN Group (MTNJ.J).
Reliance Communications, India's No. 2 mobile carrier controlled by younger brother Anil Ambani, has been in exclusive discussions with MTN since late May to forge a global top-10 mobile phone carrier.
But the share ownership dispute between the estranged brothers has cast a shadow on the deal. The talks with MTN, which have been extended once, are scheduled to end on July 21.
Analysts were divided whether the latest move by Mukesh Ambani made a Reliance Communications deal with MTN more or less likely.
"I still believe the deal will go through. I don't know whether they will extend the date again ... but what I gather is there is interest on both sides, which is becoming clearer from recent developments," said Aman Bajaj, managing director at advisory firm Nine Capital.
But Mahesh Uppal, director at telecoms consulting firm Com First in New Delhi, was less optimistic.
"My own sense is the deal is slipping. I have no insider knowledge but I feel it's too difficult a deal to clinch," he said.
Media reports and a source close to the development have indicated the two firms were aiming at a reverse takeover, with a share swap that would give Reliance Communications' parent company the largest shareholding in MTN and make the Indian carrier a subsidiary of MTN.
That triggered a claim of right of first refusal from Mukesh Ambani, who runs Reliance Industries.
Reliance Industries said in a statement on Thursday that Reliance Communications had refused to participate in conciliation meetings, part of dispute provisions contained in a 2006 deal between the brothers after they split the family empire.
"Reliance Industries has commenced arbitration proceedings," the statement said. It gave no further details of what arbitration proceedings involved, except to say it had nominated a former Supreme Court judge as an arbitrator.
In response, Reliance Communications said Reliance Industries' "design to derail MTN discussions (is) clearly exposed", adding the notice for arbitration proceedings was "legally and factually unwarranted".
Reliance Communications began talks with MTN after its larger rival Bharti Airtel (BRTI.BO) failed to reach a deal with the South African firm, but analysts have said the possibility of legal action by Reliance Industries is a major obstacle.
The enmity between the brothers, two of the richest men in the world, took another twist earlier this month when a new government ally with close links to Anil Ambani called for a windfall tax on private oil refiners.
Any such move would directly hurt Mukesh's plans to have the world's biggest refinery complex in India.
For a FACTBOX on the Ambanis' split, see [ID:nBOM165594].
For more stories on Reliance/MTN, see [nBOM343381] (Editing by Charlotte Cooper)
