UPDATE 2-Rel Comm:MTN talks progressing despite Rel Ind claim

(Recasts with Reliance Industries spokesman)

By Devidutta Tripathy

NEW DELHI, June 13 (Reuters) - India's Reliance Communications (RLCM.BO: Quote, Profile, Research) said Reliance Industries (RELI.BO: Quote, Profile, Research) had claimed first right of refusal to buy a controlling stake in it, but the mobile operator said this would not delay its tie-up talks with South Africa's MTN Group (MTNJ.J: Quote, Profile, Research).

Reliance Communications, India's second-largest mobile operator, has been in talks with MTN since late May for a business combination which could create a top-10 global telecoms firm with operations in about two dozen countries.

But its statement late on Friday brought rivalry between its chairman, billionaire Anil Ambani, and his estranged older brother Mukesh, chairman of India's largest-listed company Reliance Industries, back to the fore after a high-profile feud which led to the division of the Reliance group.

Younger brother Anil's Reliance Communications, which has a market capitalisation of $26 billion, began discussions with MTN after its larger Indian telecom rival, Bharti Airtel (BRTI.BO: Quote, Profile, Research), and MTN failed to agree the structure of a proposed tie-up.

Sources and media reports suggest the firms are looking at a structure that would see MTN take control of Reliance Communications, with Ambani swapping all or most of his 66 percent holding in the Indian firm to become the largest shareholder in MTN.

But Reliance Communications said on Friday Reliance Industries had made a claim of right of first refusal to buy the controlling stake, based on an agreement made when the telecom firm was under the control of Reliance Industries.

"Reliance Industries' claim is legally and factually untenable, baseless, and misconceived," it said in a statement.