Reliance Comm shares set to gain as MTN talks end

By Devidutta Tripathy

NEW DELHI (Reuters) - India's Reliance Communications' (RLCM.BO: Quote, Profile, Research, Stock Buzz) shares are expected to rise on Monday after it called off tie-up talks with South Africa's MTN Group (MTNJ.J: Quote, Profile, Research, Stock Buzz), avoiding a potential head-on legal clash between members of its founding Ambani family.

But analysts said stock market volatility ahead of a government confidence vote on Tuesday would dictate the movement of shares of India's second-largest mobile operator, controlled by the younger of the feuding billionaire Ambani brothers, Anil.

Reliance Communications and MTN, sub-Saharan Africa's biggest mobile phone group, ended their exclusive talks late on Friday, aimed at creating a global top-10 telecoms group, saying they could not reach a deal due to certain legal and regulatory issues.

"A deal is not happening, that will be bit of a relief for the shareholders," said Ambareesh Baliga, vice president at Karvy Stock Broking. "The stock should rise on Monday. But political issues will keep the market volatile."

The deal which would have created a company valued at $66 billion had been complicated by a claim of right of first refusal on Reliance Communication's shares by the older Ambani, Mukesh, who runs Reliance Industries (RELI.BO: Quote, Profile, Research, Stock Buzz) and had started arbitration proceedings last week.

Reliance Communication's stock has fallen 24 percent since late May when the talks with MTN were first announced, with the bulk of the decline coming after the first refusal claim.

The shares ended up 4 percent on Friday, before the exclusive talks were called off, with analysts split on whether a deal could be struck before the exclusivity lapsed on July 21.

Stock markets are however expected to focus keenly on political uncertainty.  Continued...