S.Africa's MTN, Reliance extend exclusive talks

By Gugulakhe Lourie and Rina Chandran

JOHANNESBURG/MUMBAI (Reuters) - South African mobile phone operator MTN Group and Reliance Communications have extended exclusive talks on a potential combination to create a top-10 global telecom group.

The two-week extension, announced on Wednesday, comes after a claim by Mukesh Ambani, estranged brother of Reliance Communications Chairman Anil Ambani, on shares in the Indian company and a sharp drop in share prices created hurdles to a deal by the original deadline of July 8. The new deadline is July 21.

MTN and Reliance said on Wednesday there was no certainty the discussions will result in a deal.

Dobek Pater, telecoms analyst at Africa Analysis, said the market had expected the talks to be extended.

"I think they will like to pursue the deal because they do think that is a viable opportunity. And given more time the brothers (Mukesh and Anil Ambani) will be able to resolve misunderstanding within Reliance," Pater said.

Shares in Reliance Communications, which had lost 27 percent since the company first said it was in talks, rose as much as 7 percent on Wednesday after the July 8 deadline for talks had passed without a statement from either company, interpreted as a signal the deal was off and removing the risk of legal action by Mukesh Ambani.

They subsequently gave up some gains after the announcement and were up 4.5 percent at 434 rupees at 0656 GMT in a firm Mumbai market, supported by a view that as the talks were being extended, both sides had confidence the legal issue could be resolved.

"The extension of talks is a sign that both sides are serious about a deal," said Nishna Biyani, telecom analyst at brokerage Prabhudas Lilladher in Mumbai.